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USD Dominance: Geopolitical Heat and Hawkish Fed Weighing Down the Euro
The pair EUR/USD still testing the 1.1400 level putting a pressure on it and struggled to maintain this price level. With recent sessions showed a downward drift, putting key support levels at risk.
Source: Finlogix
Outlook for the week
If the pair drops below its current support level, it signals a downward trend and likely points to further declines. If it tries to recover, it will face significant hindrance at the top of its current downward path.
Market sentiment key drivers:
- U.S. Federal Reserve’s recent meeting minutes were hawkish, noting that inflation remains a concern. This has kept the door open for another rate hike this year, which continues to support the U.S. Dollar.
- Rising tensions between the U.S. and Iran are increasing demand for safe-haven assets like the USD, creating further headwinds for the Euro.
- Market is highly reactive to incoming U.S. economic data. Upcoming inflation (CPI) and labor reports will be critical, any surprise data will likely cause significant volatility with the U.S. Dollar expected to react most sharply to these releases.
ECONOMIC INDICATORS TO WATCH THIS WEEK
EUR GERMANY WHOLESALE PRICES July 14
US INFLATION RATE July 14
US FED CHAIR TESTIMONY July 14
EURO AREA INDUSTRIAL PRODUCTION July 15
US PRODUCERS PRICE INDEX July 15
US RETAIL SALES July 16
US HOUSING STARTS July 17
US BUILDING PERMITS PRELIM July 17
US INDUSTRIAL PRODUCTION July 17
US MICHIGAN CONSUMER SENTIMENT PRELIM July 17
TECHNICALS
Source: ACY
Initially, we saw a price reaction peaking at 1.16174 based from previous release of Wholesale Price Index last June 15th from the 60-minute chart. The market quickly turned, with the price dipping down to a low of 1.16009 shortly after its initial release.
Support 1 -1.13782
Support 2 -1.13612 -1.13594 once the 1.137 level breached this is the next target price region.
Resistance 1- 1.14416
Resistance 2 - 1.14999
Bollinger Bands and the 20-period Exponential Moving Average are indicating downward momentum.
RSI or Relative Strength Index reading at 38.71 the pair is moving toward the oversold state but has not quite reached it yet.
Q2 Earnings Report
July 14 JP Morgan Chase, Bank of America, Goldman Sachs, Wells Fargo
July 15 ASML, Taiwan Semiconductor Manufacturing Company
July 16 Morgan Stanley, BlackRock, Neftlix, UnitedHealth Group, Abbott Laboratories, GE Aerospace
Conclusion & The ACY Edge
The outlook remains bearish. While the pair has attempted to stabilize, the combination of a cautious Fed and geopolitical uncertainty keeps a cautious approach toward long positions favored. Traders are watching the 1.1400 level closely; a firm break below this would likely signal further weakness.
On top of this, earnings reports on Wall Street can influence the DXY or US Dollar movement as strong earnings particularly when better than expected profits likely to signal economy is resilient and strong consumer spending as it would attract investors to US assets increasing demand and boosts for the US Dollar. Also the report does not just impact the equity prices, it also influence how the Federal Reserve view the economy. If the listed companies are performing well, probability it might give the Fed more space to keep the rate higher to combat inflation as higher rates makes the US dollar appealing to global investors and appreciates the value of the currency.
We should also note that market currently is sensitive to geopolitical tensions and Federal Reserve policy, strong earnings could stabilize the US dollar while earnings are crucial, they are secondary to major economic data releases like the Inflation report. If earnings are positive yet inflation data comes out hotter than expected, the interest rate narrative will likely outweigh the earnings news in driving the US Dollar. Because global investors hold so many shares in major companies, surprise earnings results can trigger broad market swings that quickly spill over into the currency markets.
Disclaimer: This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
