- At the end of last week's trading, the price of the EUR/USD currency pair tried to rebound to the upside, with gains that affected the resistance level at 1.0931, after it collapsed to the support level at 1.0835.
- It settled around the level of 1.0906 at the beginning of this exciting week's trading, whose title is the minutes of the last meeting of the US Federal Reserve ending with the US job numbers.
- Which will have a strong and direct reaction to the trend of the currency pair that is currently closest to falling.
Overall, the euro was softer against the rest of the major currencies on the same day reported in the eurozone inflation data for the June analyst forecast, and confirmed price pressures across the bloc. The Euro was lower against all of the G10 currencies as investors continue to anticipate a peak in the European Central Bank's (ECB) policy rate in light of inflationary evidence on its way to the 2.0% target.
Statistics agency Eurostat reported that HICP inflation was higher at 5.5% in June, down from 6.1% in May and below the 5.6% expected by the consensus of economists. However, the figure was higher on a monthly basis to 0.3%, up from 0% and above expectations for 0%. But it was a measure of core inflation - which strips out the impact of variables like food and energy - that will be of most interest to policymakers, given that it came in at 0.3%. This was lower than the 0.7% the market had expected, but slightly higher than the previous month's 0.2%.
Germany provided an upward impetus with a 0.3% rise in headline inflation from -0.1% in May. But, even in Germany, core inflation also swelled at 0.3% in June, while the market had expected 0.7%. Service inflation rose from 5.0% to 5.4% on the back of core effects mainly due to Germany's introduction of a €9.00 transport ticket incentive a year ago.
In the same vein, the French Consumer Price Index rose 4.5% in the year to June, below expectations of 4.6% and lower than May's 5.1%. Italian inflation fell sharply in June with a monthly reading of 0%, down from 0.3% in May, and the year-on-year figure came to 6.4%, which was well below the 6.8% consensus forecast and 7.6%. But it is in Spain where the trends are the most instructive of the outlook that the annualized rate fell to 1.9% in June, putting it below the European Central Bank's target of 2.0%. Economists say Spain is something of a bell for Europe as inflationary pressures pass “much faster than in other European countries.
However, despite the services PMI reading, there is nothing in this data that would give investors a reason to boost bets against a higher ECB policy rate, which could explain some of the euro's exchange rate weakness at the end of the month. Money market pricing shows an expectation of another 25 basis points of rate hikes from the ECB in 2023, with one hike essentially guaranteed in July, raising the possibility of a skip at the September meeting. Either way, a peak is close at hand because pricing has failed to move much higher for several weeks now and inflation data indicates slowing inflation rates.
As for the EUR, there may be a bit of bullish impulse left in the interest rate channel.
EUR/USD Technical Outlook:
In the near term, according to the performance of the hourly chart, it appears that the EUR/USD is trading within a bearish channel formation. This indicates a short-term bearish bias in market sentiment. Therefore, the bears will be looking to extend the current decline towards 1.0898 or below to support at 1.0879. On the other hand, bulls will target a potential rebound around 1.0935 or higher at the 1.0953 resistance.
In the long term, and according to the performance on the daily chart, it appears that the EUR/USD is trading within an ascending channel formation. This indicates a significant long-term bullish bias in market sentiment. Therefore, bulls will target long-term profits around 1.1009 or higher at 1.1092 resistance. On the other hand, the bears will look to pounce on the gains around 1.0839 or lower at the 1.0752 support.
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