The EUR/USD exchange rate entered the new week's trading at its highest level since the invasion of Ukraine, but technical resistance near 1.1273 and above on the charts could thwart the recovery without deeper losses for the Chinese Yuan or a steady rise in risk assets in the coming days. At the beginning of this week's trading, the price of the EUR/USD pair jumped towards the 1.1248 resistance level and settled near it at the beginning of today's trading session.
In general, it seems that the single European currency - the euro - has benefited at the beginning of the week's trading, as the exchange rates of the US dollar fell further, and many of the largest competing currencies in the Chinese Foreign Exchange Trade Index (CFETs), including the euro, the Japanese yen and the Korean won, rose after it The Chinese economy for the fourth quarter grew more slowly than some forecasters expected.
Yesterday's economic data indicated that the acceleration of the world's second-largest economy in the fourth quarter was weaker than the expected consensus while it seemed to point to weak household spending growth as the cause, leaving the Chinese yuan mired in widespread losses to open the new week. Commenting on this, Kenneth Brooks, a forex market analyst at Societe Generale, wrote, “The trend of negative surprises stopped briefly last week when yuan lending data exceeded expectations, but GDP caused the trend to return to the 2023 standard.” "Tactically, we wouldn't be surprised if last week's moves go further, and EUR/USD and GBP/USD were bought on dips," he added.
The euro and renminbi pair reached its highest level since September 2020 on Monday while EUR/USD was trading at its best level since February 2022 although the gains in the latter had to do with the further decline in the US dollar, which fell widely last week.
Commenting on the performance of financial markets, Jane Foley, forex analyst at Rabobank, writes, “Signs of declining inflation in the US and a high level of skepticism about the Fed’s ability to raise US interest rates beyond the July meeting, suggest that a weak dollar is likely. prevails in the near term.” However, signs that the ECB rate hike cycle is heading towards its peak suggest that EUR/USD may struggle to make further gains after the summer season. In addition, if US recession fears increase until the end of the year, the US dollar may benefit from broad support and while EUR/USD tended to 1.11 in one month.
All in all, the US dollar was sold off broadly last week when official data indicated that inflation in the US fell again to 3% and near the 2% target for the Federal Reserve (Fed) in June, sending risk assets such as equities higher. And commodities, with the rise in the prices of the euro, the pound sterling and other currencies, and in return, the dollar fell.
Last week's data did little to change market assumptions about the outlook for US interest rates, but the sell-off in the dollar and easing of financial conditions resulting from a rise in risk assets could mean that in July, or perhaps also September, a rate hike is now likely.
Euro predictions against the dollar today:
- There is no change in my technical direction, only the performance on the daily chart below.
- The upward shift of the stronger EUR/USD currency pair.
- Last week’s gains were sufficient to push the technical indicators towards strong overbought levels, but more gains are not ruled out if they continued.
- The markets are understanding that the European Central Bank is more willing to raise interest rates, in contrast to calming expectations about a US interest rate hike.
- In general, the nearest resistance levels for the currency pair are currently 1.1285, 1.1330, and 1.1400, respectively.
On the other hand, there will be no return for the bears to control the trend without moving towards and without psychological support (formerly psychological resistance), which is 1.1000 again. Today, the euro/dollar pair will be affected by the announcement of US retail sales figures, then industrial production, and statements by some members of the US Federal Reserve Bank.
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