Fundamental analysis of EUR/USD

The EUR/USD pair showed a slight correction, declining after the dollar-driven weakness in the European session on Thursday to 1.12290, currently trading at 1.12150.

 The US is somewhat indifferent to the mixed sentiment around the Eurozone. Moreover, issues such as inflation and military action in Ukraine are seen as contributing factors to the worsening employment situation in the eurozone. Meanwhile, European Central Bank (ECB) President Yannis Stournaras expressed uncertainty whether the ECB will raise interest rates further after an expected 25 basis point hike, in his view, lower inflation and further interest rate hikes could hurt the economy.

The economic transformation in the US is more skeptical compared to the Eurozone, which strengthens EUR/USD, especially given the Fed's expected policy change after July and the ECB's slightly less dovish stance. In contrast, the US Dollar Index (DXY) lost 0.25% on the day to reach 100.00. This was due to weak US housing data and mixed sentiment towards the Fed.

Meanwhile, the European Central Bank's forward guidance continues to support EUR/USD. Despite ECB President Christine Lagarde and members of the Executive Board stating their commitment to controlling inflation, the ECB has switched to data dependence after the summer break. Therefore, investors should pay attention to the ECB comments, it could make a difference in the market if ECB members do not speak today.

Elsewhere, statements from Chinese representatives and actions by the US House of Representatives regarding foreign investment and artificial intelligence have increased fears of conflict between the US and China, which seems to be pushing EUR/USD upwards.

As for future developments, the economic report will include important indicators such as Eurozone consumer confidence, US first jobless claims, current home sales, and German producer price index: analysts forecast a 0.4% decline in June vs. 1 in the previous month. Given the current weak demand environment, another recession looms on the horizon, which could prove more problematic for the German economy.

Technical analysis and scenarios:

The Stochastic Oscillator (5,3,3) is currently at 68.1525 and the signal line is located at 57.8291, indicating that the market is neither oversold nor overbought. This indicates that the price can rise or fall without much pressure.

As for the Bollinger Bands, the price is currently around the lower band located at 1.11970, the middle band is located at 1.12180 and the upper band is located at 1.12550. As the indicator is moving horizontally, this indicates a period of relative stability with a wide range. However, given that the price is operating in the lower band area, it indicates bearish sentiment.

MACD (12,26,9) is showing a value of 0.001431 with the signal line at 0.002324. The MACD line is below the signal line, which usually indicates a bearish signal.

Main scenario (BUY)

Recommended entry level: 1.13000.

Take Profit: 1.13500.

Stop Loss: 1.12750.

Alternative scenario (SELL)

Recommended entry level: 1.11360.

Take Profit: 1.10230.

Stop loss: 1.11750.