Fundamental analysis of EUR/USD
Ahead of the release of data from the Federal Reserve's monetary policy meeting, EUR/USD hovered around 1.10600. The attack on the euro highlights the economic uncertainty of the Fed and the European Central Bank (ECB) caused by blockchain, which is new to business thinking, as well as the latest data in Europe and America. Meanwhile, the dollar halted its losses ahead of a two-week high as support for the currency came from EUR/USD and uncertainty weighed on a multi-day competitive recovery. Nevertheless, stagnation seems to be a safe haven for the euro pair amid concerns over the limitation of the Fed's rate hike.
The International Monetary Fund's (IMF) revision of global growth forecasts and disappointing data from major economies make one wary: the cycle is in full swing. The IFO German business climate index fell to 87.3 in July, below expectations of 88.0 and 88. Earlier, the monthly economic index came in at 91.3, down from 93.7 in June and below expectations of 93.0. In addition, the IFO confidence index, which reflects business activity forecasts for the next six months, fell to 83 in July. The consensus estimate was 83.0, down to 5 from 83.8 previously. Continued weakness in the German economy is likely to persist into the third quarter.
Meanwhile, consumer confidence is on the rise in the US. It rose to 117.0 in July from the previous reading of 110.10. In addition, US home prices continued to rise by 0.7% in May, exceeding expectations of 0.2%. Yields on 10-year and 2-year US Treasuries rose the previous day, approaching two-week highs set on Tuesday near 3.89% and 4.88%, respectively.
Given the low fiscal calendar in the Eurozone and the Fed's inability to move forward, EUR/USD could be under attack. However, risk catalysts and secondary US data may give traders something to ponder. The euro's recovery will depend on Fed Chairman Jerome Powell's ability to defend his hawkish policy stance. With the ECB forecasting a 25 basis point rate hike on Thursday, the market is now saying that the ECB should be cautious. However, the ECB has so far shown an unwavering determination to fight inflation and there are no ECB members scheduled to speak today, so media commentary will influence the market.
US real estate data will not have a significant impact on EUR/USD, the focus will be on the Fed's rate decision and its next press conference. A 25 basis points change in the rate will lead to the FOMC statement and the news will have the potential to move the market. Given that the softer US CPI report eliminated expectations of a September rate hike, a hawkish 25 basis point rate hike would take the markets by surprise.
Technical analysis and scenarios:
Price is currently at the 1.13805 level. The key levels include support levels at 1.10230, 1.09200 and 1.08650 and resistance at 1.12700, 1.12190 and 1.11360. The Stochastic oscillator is at 60.9337, indicating bullish momentum as the signal line at 49.9328 has been exceeded. However, it is not yet in overbought territory, leaving room for upward price movement before a reversal is possible. The Bollinger Bands are currently in a downtrend and the price is in the lower range. The upper band is at 1.11520, the middle band is at 1.10820 and the lower band is at 1.10230. Given that price is rising within the lower range, this suggests that we may see some upward movement towards the middle band. The MACD indicator, which has a value of -0.002991 and a signal line at -0.003178, is also giving a slight bullish signal as its value is above the signal line, indicating a potential upward price move.
Main scenario (BUY)
Recommended entry level: 1.11360.
Take profit: 1.12190.
Stop loss: 1.10900.
Alternative scenario (SELL)
Recommended entry level: 1.10230.
Take Profit: 1.09200.
Stop loss: 1.10600.