Fundamental analysis of EUR/USD

The EUR/USD pair is going to have an active day, during which many important events will take place. Among them is the release of the final inflation data for Italy. However, this data is expected to have only a minor impact on market sentiment regarding the European Central Bank's (ECB) objectives and euro policy. 

 In particular, today's speeches from ECB President Christine Lagarde and Chief Economist Philip Lane will be key. Investors will be watching for hints on the future direction of policy beyond the summer. In addition to monetary policy issues, markets may be influenced by new information regarding growth and inflation forecasts. Earlier, economic data from China set the tone. The Chinese economy grew by 0.8% in the second quarter and 6.3% year-on-year. It was expected to grow 7.3% year-on-year, but the forecast for the second quarter was only 0.5%. 

 The current economic schedule in the US is relatively light. Empire State New York manufacturing business activity data for July is approaching growth, but unless there is a sharp drop, it is unlikely to affect market sentiment. Futures on the S&P 500 index were losing money in Tokyo trading amid the start of the Q2 reporting season. Adding to that are concerns about unpredictable corporate performance due to aggressive policy tightening by the Federal Reserve (Fed). Monthly retail demand is expected to increase 0.5% versus 0.3% previously. Retail demand excluding automobiles will increase 0.3% versus 0.1% last year. Meanwhile, the euro is strengthening as the European Central Bank (ECB) is expected to plan a rate hike amid rising inflation in the eurozone since July. Given the high inflation rates - 5.5% for core inflation and 5.4% for core inflation - this is a significant jump from the 2% target.

Technical analysis and scenarios:

EUR/USD is currently trading near the 1.12250 level, showing signs of consolidation. The Stochastic Oscillator value is at 45.1582 with a signal value of 52.2814. This indicates that the pair is neither overbought nor oversold and can move in either direction. The Bollinger Bands indicate the possibility of volatility in the market: the price is currently trading in the upper range of the bands. The bands are moving upwards and the price range is shrinking, which may indicate an emerging bullish trend. The Moving Average Convergence Divergence (MACD) value is 0.006016 with a signal value of 0.006814. This indicates a bullish momentum, albeit slight, as the MACD line (value) almost coincides with the signal line.

Main scenario (BUY)

Recommended entry level: 1.12500.

Take Profit: 1.13500.

Stop Loss: 1.12150.

Alternative scenario (SELL)

Recommended entry level: 1.11310.

Take Profit: 1.09970.

Stop loss: 1.12150.