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 beneath the psychological 100.00 degree for the primary time since April 2022. The index is heading in the right direction 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 present in a blackout and never any important knowledge releases on the agenda forward of the assembly the Greenback might face additional promoting strain. CME FedWatch Device beneath we are able to see market individuals are nonetheless pricing in a 25bps hike on the July assembly.

Supply: CME FedWatch Device

I for one do anticipate the Federal Reserve to proceed with its mountain climbing cycle on July 26 with any shock more likely to be in regards to the dimension 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 dimension of hikes could also be wanted. Market individuals appear to consider that the Fed won’t elevate 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 economic system may very well be interpreted by market individuals as an indication that the Fed might be able to lower charge prior to anticipated which might additional weigh on the greenback.

Speak has now pivoted to a possible ‘comfortable touchdown’, a phrase which had irked market individuals for a very long time. Fascinating instances 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 present we do have the preliminary Michigan Shopper Sentiment launch which might 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 meanwhile. It appears the Greenback Index may very well be in for a bumpy experience forward of the FOMC assembly.

For all market-moving financial releases and occasions, see the DailyFX Calendar

TECHNICAL OUTLOOK AND FINAL THOUGHTS

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 right this moment 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 can be of specific 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 nicely which doesn’t bode nicely for a possible retracement. Technicals are flashing some combined alerts nevertheless the age-old adage of ‘the development is your good friend’ has by no means been more true. Making an attempt to select a prime at this stage is a slightly silly endeavor with the sensible play being a pullback to permit potential bulls a possibility to get entangled.

EUR/USD Every day Chart – July 14, 2023

Supply: TradingView

Key Ranges to Maintain an Eye On

Assist Ranges

Resistance Ranges

IG CLIENT SENTIMENT DATA

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

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

Contact and observe Zain on Twitter: @zvawda