- ECB policymakers are considering a 50bps hike at tomorrow’s meeting.
- Eurozone inflation rose to 8.6%, boosted by rising fuel and food prices.
- Recession worries have gone down as markets expect the resumption of gas flows through Nord Stream 1 on Thursday.
Today’s EUR/USD price analysis is bullish as ECB policymakers are considering raising interest rates by 50bps when markets had only expected 25bps. To cushion the rising interest rates, the ECB plans to help indebted countries like Italy through the bond market.
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The discussion about raising rates by 25bps or 50bps is still wide open, according to Reuters, as the risk of recession in Europe has made the ECB cautious about choking growth. As markets expected, Eurozone inflation rose to 8.6% due to rising fuel and food prices. This inflation is expected to slowly fall slightly above the ECB’s 2% target through 2024. This gradual decrease raises the risk of inflation entrenched in the labor market and a spiral in wages.
The pair is also getting support from news that Russia will likely resume gas flows via the Nord Stream 1 pipeline on Thursday as scheduled. However, Russian President Vladimir Putin said that the pipeline’s capacity could be cut due to issues with other pumping units.
EUR/USD key events today
Investors expect existing US home sales to drop from 5.41 million to 5.38 million for June. This report will show a contraction in the US housing market. A value higher or lower than expected could cause some volatility in the EUR/USD.
EUR/USD technical price analysis: Consolidating at 1.02519
After a strong bullish move, the 4-hour chart shows some indecision at the 1.02519 level. This consolidation could signal that bulls are resting before they resume the move up or that bears might come in to push the price lower. The pair is in a clear uptrend in the 30-SMA, which is well below the price, and the RSI, which trades above 50.
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If bears come in at this level, the price might retest yesterday’s support level at 1.01186 before possibly resuming the uptrend. However, if bulls can maintain strong momentum, the price might break above 1.02519. Above this level, it will be smooth sailing to the next hurdle at 1.04015.
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Saqib Iqbal
