EUR/USD Catches its Breath at Multi-Month Highs, The place to Subsequent?

EUR/USD PRICE FORECAST:

READ MORE: USD/CAD Forecast: 1.3000 Beckons as Greenback Index (DXY) Slide Continues

EUR/USD has been on a tear because the US CPI launch this week reaching multi-month highs across the 1.1245 mark. The transfer has largely been facilitated by greenback weak spot because the Greenback Index (DXY) broke under the psychological 100.00 stage for the primary time since April 2022. The index is on target for its worst week since November 2022.

DISINFLATION NARRATIVE TAKES HOLD OF THE DOLLAR

It could appear that the disinflation narrative has firmly gripped the Greenback given the selloff over the previous few days. The FOMC assembly is on July 26 with the Fed at the moment in a blackout and never any vital knowledge releases on the agenda forward of the assembly the Greenback may face additional promoting stress. Taking a look at CME FedWatch Software under we will see market members are nonetheless pricing in a 25bps hike on the July assembly.

Supply: CME FedWatch Software

I for one do count on the Federal Reserve to proceed with its mountaineering cycle on July 26 with any shock more likely to be in regards to the measurement of stated hike. Fed Chair Powell in testimony earlier than Congress acknowledged that because the Fed nears their objective, pauses and a possible slowdown within the measurement of hikes could also be wanted. Market members appear to consider that the Fed is not going to increase past the July assembly whereas the Greenback is more likely to be extraordinarily delicate towards lackluster knowledge out of the US. Any indicators of a slowdown within the US financial system may very well be interpreted by market members as an indication that the Fed could possibly lower charge before anticipated which may additional weigh on the greenback.

Speak has now pivoted to a possible ‘mushy touchdown’, a phrase which had irked market members for a very long time. Fascinating occasions forward for the US Greenback and naturally markets as a complete as we head towards the July FOMC assembly and past.

RISK EVENTS AHEAD

At the moment we do have the preliminary Michigan Shopper Sentiment launch which may stoke some volatility across the greenback. Waiting for subsequent week and we solely have US retail gross sales and preliminary constructing allow knowledge on the docket, neither of that are more likely to alter the US {Dollars} outlook in the mean time. It appears the Greenback Index may very well be in for a bumpy trip forward of the FOMC assembly.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

Taking a look at EURUSD from a technical perspective and we’re buying and selling at ranges final se in February 2022.The greenback is staging a small come again as we speak up round 0.20% on the time of writing. We’ve seen a slight pullback from the highs in EURUSD because the US session approaches.

The RSI is in overbought territory, hinting at a possible retracement with the 1.1200 more likely to be key. The every day and weekly candle shut shall be of explicit curiosity as a detailed above 1.1200 might embolden bulls as the brand new week kicks off. The MAs on the weekly are establishing for a golden cross sample as properly which doesn’t bode properly for a possible retracement. Technicals are flashing some blended indicators nevertheless the age-old adage of ‘the development is your buddy’ has by no means been more true. Attempting to select a high at this stage is a slightly silly endeavor with the good play being a pullback to permit potential bulls a possibility to get entangled.

EUR/USD Each day Chart – July 14, 2023

Supply: TradingView

Key Ranges to Hold an Eye On

Help Ranges

Resistance Ranges

IG CLIENT SENTIMENT DATA

IGCSshows retail merchants are at the moment SHORT on EURUSD, with 76% of merchants at the moment holding SHORT positions. At DailyFX we sometimes take a contrarian view to crowd sentiment, and the truth that merchants are brief means that EURUSD might take pleasure in a brief pullback earlier than persevering with to increased towards the 1.1400 deal with.

Written by: Zain Vawda, Market Author for DailyFX.com

Contact and comply with Zain on Twitter: @zvawda