The 1.1200 region holds the downside so far. – Crypto News – Crypto News
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The 1.1200 region holds the downside so far. – Crypto News

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  • Euro holds above 1.1200 against the US Dollar.
  • Stocks in Europe advance further on Wednesday.
  • EUR/USD bounces off earlier lows in the sub-1.1200 yardstick.
  • Final Eurozone CPI rose 5.5% YoY in June, Core CPI rose 5.5% YoY.
  • US housing data will take center stage later in the session.

The Euro (EUR) manages to stage a recovery after initially dropping against the US Dollar (USD), allowing EUR/USD to climb back above 1.1200 amid an overall risk-off market environment.

The strengthening dollar, as evidenced by the Dollar Index (DXY) retaking the 100.00 level to hit multi-day highs around 100.30, favors the pair’s lack of direction.

This comes alongside falling US bond yields across the board and new lows for German bund yields, suggesting rising demand for safe havens.

Looking ahead, although the Fed is perceived as nearing the end of its tightening cycle, the broad view of another 25 basis points (bps) interest-rate hike in July could keep the dollar supported.

Meanwhile, a rate hike by the European Central Bank (ECB) later this month is widely anticipated, but ECB Officials have sounded less hawkish recently on the prospects of additional hikes beyond summer, hinting more consensus may be needed for that.

Data-wise in the region, the euro zone Final inflation data for June showed headline inflation at 5.5% YoY and core inflation at 5.5% YoY.

In the US, Mortgage Applications rose 1.1% in the week to July 14, while June’s Housing Starts and Building Permits will be in focus later in the session.

Daily digest market movers: Euro wobbles above 1.1200, as risk-off mood prevails

  • The EUR rebounds from the sub-1.1200 area against the USD.
  • Eurozone Final CPI and Core CPI rose 5.5% in the year to June.
  • The USD Index picks up pace and surpasses the 100.00 hurdle.
  • Speculation that the Fed’s July hike could be the last one runs high.
  • US, German yields keep the downside well in place for yet another session.
  • Traders see the BoE’s interest rate peaking below 6%.
  • UK inflation loses traction in June.

Technical Analysis: Euro’s rally meets resistance around 1.1275 so far

Price action in the EUR/USD pair hints at the idea that further gains might be in store in the short-term horizon.

The pair printed a new 2023 high at 1.1275 on July 18. Once this level is cleared, there are no resistance levels of significance until the 2022 peak of 1.1495 recorded on February 10.

On the downside, the 1.1000 region emerges as a psychological support seconded by provisional support at the 55-day and 100-day SMAs at 1.0893 and 1.0871, respectively, ahead of the July 6 low of 1.0833. The breakdown of this region should meet the next contention area at the key 200-day SMA at 1.0674 prior to the May 31 low of 1.0635. South from here emerges the March 15 low of 1.0516 before the 2023 low of 1.0481 on January 6.

Furthermore, the constructive view of EUR/USD appears unchanged as long as the pair trades above the key 200-day SMA.

However, the current pair’s overbought condition, as per the daily Relative Strength Index (RSI) near 75, carries the potential to spark a technical correction in the short-term horizon.

ECB FAQs

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB’s primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

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