EUR/USD stays rangebound ahead of ECB policy announcement as traders await Trump’s decision on Iran
FUNDAMENTAL OVERVIEW
USD:
The US dollar has been under some pressure since last week as the soft US inflation data led to a dovish repricing in Fed interest rate expectations. There’s now just a 15% chance of a rate hike in July, but the probabilities for a September move remain above 50% (currently 61%).
The US-Iran crisis in the background is keeping inflation risks skewed to the upside, so the downside in the greenback should remain limited without a clear de-escalation. We can expect the rangebound price action to persist with this backdrop.
Axios reported today that Trump is nearing a decision between a 10-day ceasefire to reopen the Strait of Hormuz and a full-scale war with Israel against Iran. It goes without saying that a ceasefire would be negative for the US dollar, while a full-scale war would push the greenback into new highs.
EUR:
On the EUR side, the ECB is expected to hold interest rates steady this week maintaining the data-dependent and meeting-by-meeting approach. The central bank will likely lean on the hawkish side given the renewed US-Iran conflict but refrain from pre-committing to a rate hike in September.
The market is expecting a total of 43 bps of tightening by year-end with a 75% probability of the next rate hike coming in September. Traders will mainly focus on Lagarde’s press conference. If she sounds more dovish compared to market expectations, the euro will likely come under pressure. Conversely, a more hawkish tone might give the single currency a short-term boost.
EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that EURUSDrejected the major trendline as the sellers stepped in to position for a drop into new lows. The price is now bouncing from the key support zone around the 1.14 handle. The price action will likely compress further between the support and the trendline, with traders waiting for a breakout on either side for the next sustained trend.
EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have an upward trendline defining the recent correction. The buyers will likely continue to lean on the trendline with a defined risk below it to keep targeting a break above the major trendline. The sellers, on the other hand, will want to see the price breaking below the trendline and the support to pile in for a drop into the 1.10 handle next.
EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor downward trendline defining the recent bearish momentum. We can expect the sellers to lean on the trendline to keep pushing into new lows, while the buyers will look for a break to extend the rally into the major trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Thursday, we have the ECB policy decision and the US Jobless Claims data, while on Friday we conclude the week with the Eurozone and US PMIs. The focus remains on US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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