EUR/USD continues to hover near 1.0800 after Fed Chair Powell’s testimony didn’t meet market expectations. The market was anticipating a potential shift in tone from Fed policymakers, but instead, Powell maintained a cautious stance. Investors are now turning their attention to upcoming US inflation data later in the week as the key driver of market movements. This includes the US Consumer Price Index (CPI) inflation data, which is expected to remain steady at 3.4% YoY for core CPI and tick up to 0.1% MoM for headline CPI in June. Additionally, Initial Jobless Claims data and German Harmonized Index of Consumer Prices (HICP) figures are also set to be released, providing further insights into the economic landscape.
On the technical front, EUR/USD is experiencing a slow grind near 1.0800, with price action caught between downside pressure and support from the 200-hour Exponential Moving Average (EMA) at 1.0787. The pair is likely to face resistance in its bullish push from the last swing low near 1.0660, indicating a possible reversal back below the 200-day EMA at 1.0784. As momentum wanes, EUR/USD could see a pullback in the near term, with further downside potential.
The Euro is the currency used in the 20 European Union countries that make up the Eurozone. It is the second most traded currency globally, after the US Dollar. The European Central Bank (ECB) in Frankfurt, Germany, acts as the reserve bank for the Eurozone, setting interest rates and managing monetary policy to maintain price stability. High interest rates typically benefit the Euro, while low rates can weaken it. Eurozone inflation data, GDP, and other economic indicators influence the strength of the Euro against other currencies. The Trade Balance, which measures a country’s exports and imports, also impacts the value of the Euro.
In 2022, the Euro accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion. EUR/USD is the most heavily traded currency pair, making up approximately 30% of all transactions. Market participants closely monitor ECB decisions and economic data releases to assess the health of the Eurozone economy and its impact on the Euro. Strong economic data and positive trade balances can bolster the Euro, while weak data and negative balances may lead to a decline in the currency.
As traders await key US inflation data later in the week, including the CPI figures and Initial Jobless Claims, EUR/USD is likely to remain in focus. The pair’s technical outlook suggests a potential reversal back below the 200-day EMA, with resistance at the 1.0800 level. The outcome of the data releases and Fed Chair Powell’s testimony could determine the direction of EUR/USD in the coming days. Stay tuned for more updates on the Euro and its performance in the forex market.
