- There are doubts about the ECB’s commitment to further interest rate hikes.
- The euro has appreciated about 3.5% against the dollar this year.
- The ECB recently raised interest rates by 25 basis points.
Today’s EUR/USD price analysis is bearish. Euro bulls face an uneasy summer as doubts arise about the European Central Bank’s commitment to further interest rate hikes. The euro has performed exceptionally well this year, appreciating about 3.5% against the dollar to nearly $1.11. Moreover, it remains close to this month’s record highs against other Eurozone trading partners’ currencies.
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Furthermore, investors have positioned themselves confidently for a continued rise in the euro. Their optimism stems from the belief that the Fed will conclude its rate-raising cycle before the ECB adopts a dovish stance. However, beneath the surface, investors and economists see an end to tightening. Inflation is easing, and the economy is weakening.
Notably, the ECB raised interest rates by 25 basis points, bringing it to a 23-year high of 3.75%. Additionally, there were concerns about persistently high inflation.
During the press conference, ECB President Christine Lagarde emphasized that all options remained on the table to tackle inflation. However, she also introduced a dovish note, causing the euro to drop by 0.9% against the dollar. Lagarde stated that further rate increases might not be imminent, emphasizing that future decisions would be data-dependent.
Market participants now anticipate a 40% chance of another quarter-point rate hike by the ECB in September. In contrast, they suspect the Federal Reserve’s recent interest rate hike was its last tightening move. The opposing directions of stubborn inflation and the looming risk of recession present challenges for policymakers.
EUR/USD key events today
Now, investors will redirect their attention to US inflation data. The US will release the core PCE price index, which the Fed uses as a crucial metric to assess inflation.
EUR/USD technical price analysis: Price dips below key level, reaches 1.0950 support.
On the charts, the EUR/USD has plunged to the 1.0950 support after breaking below 1.1050 support. Bulls had initially attempted to take over control by puncturing the 30-SMA resistance. However, bears made an engulfing candle that led to a continuation of the downtrend.
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Notably, the RSI has entered the oversold region. This and the 1.0950 support could lead to a short pause or pullback. However, the bearish trend will continue if the price rises below 30-SMA.
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Saqib Iqbal
