- US President Trump will keep overshadowing macroeconomic data.
- EUR/USD neutral shorter term, but bears surge in the longer perspective on central banks' imbalances.
The EUR/USD pair is heading to close the week with modest gains at around 1.1720, in another week were political jitters led the way for currencies. The greenback, which started the week on a soft note, got a nice boost from a confident Fed's head, Powell, who testifying before the Congress, gave an upbeat assessment of the economy. Powell remarked that "with a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that – for now – the best way forward is to keep gradually raising the federal funds rate." His speech, consistent with the Minutes of the latest meeting, alongside with encouraging data coming the next couple of days, sent the EUR/USD pair to a fresh 3-week low of 1.1574.
Dollar's momentum flipped to a dollar sell-off late Thursday, as in an interview, US President Trump criticized Fed's decision. He said that he is not thrilled about Fed's decision, as "we go up and every time you go up they want to raise rates again. I don't really — I am not happy about it. But at the same time, I’m letting them do what they feel is best.” The market rushed to unwind the USD longs, despite the White House rushed to report that the President respects Fed's independence and is not will to interfere with the central bank's decisions. The damage, however, was already done, and the USD kept falling through Friday.
Also, Trump revived trade war concerns by the end of the week, stating that "I'm ready to go to 500" referring to impose tariffs to the whole amount of Chinese imports the US had last year. Equities entered free-fall, and the dollar followed through across the board. Strong data coming from Canada, usually hard enough to affect other currencies, have added to broad dollar's weakness.
The upcoming week will be quite interesting in terms of macroeconomic data, as the July preliminary Markit PMI will be out on Tuesday for both economies. No doubts, the most interesting day will be Thursday, as the ECB will have its monetary policy meeting. On Friday, the US will release Q2 preliminary GDP and PCE inflation. But for now, be sure that Trump's decisions/announcements will keep overshadowing data.
EUR/USD technical outlook
The EUR/USD pair is up for the week, but still unable to clear the 1.1720 Fibonacci resistance, having spent the last 4 weeks battling around it without being able to clearly break it Despite the positive close, the pair has set a lower low and a lower high, not enough to confirm further gains ahead. In the mentioned chart, the pair is still developing far below a bearish 20 SMA, while technical indicators remain directionless within negative territory, which means that bulls' conviction is still limited.
In the daily chart, the pair remains neutral, moving back and forth around a horizontal 20 DMA, and far below a bearish 100 DMA, which firmly approaches to the 1.1855 level, a line in the sand at the time being, as it is the 38.2% retracement of the April/May slump, and the high reached after the latest ECB's monetary policy decision. Technical indicators have bounced from their mid-lines, but remain within familiar levels, and the upward Momentum remains limited. The high at 1.1790 is the first resistance for these upcoming days, followed by the mentioned 1.1855. If this last gives up, bears will probably do the same. Supports for the upcoming days are at 1.1660 and 1.1590, while below this last the next relevant level is the 1.1500 region, where the pair bottomed twice this year.
EUR/USD sentiment poll
The FXStreet Forecast Poll presents a mixed perspective for the EUR/USD pair which reflects the current lack of direction. Bears are a majority in the weekly perspective, but bullish in the monthly one, to turn back negative in the longer perspective. The average targets in all of them, are confined to familiar levels, between 1.1600 and 1.1700, in where the pair has been stuck for the last few weeks. The overview chart reflects the neutral stance, although in the 3-month view, the trend tends south, probably as investors are still pricing in more rate hikes in the US and a dovish stance from the ECB.
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