EURUSD is moving in Ascending channel and market has fallen from the higher high area of the channel
EUR/USD Struggles to Break 1.0900: What’s Next?
EUR/USD has recently faced a challenging trading week, unable to decisively break past the 1.0900 mark. This has left many traders questioning the future direction of the pair, especially with significant economic events on the horizon. Let’s dive into the factors at play and what they mean for EUR/USD.
The Battle at 1.0900: Why EUR/USD Struggles
After a brief surge above 1.0900, EUR/USD pulled back sharply, indicating a potential halt in its near-term bullish momentum. The price action has been confined within a descending price channel, creating uncertainty among traders. The ongoing battle between EUR/USD and the 1.0900 level has been intense, driven by multiple factors.
One key factor is the influence of Fedspeak, as comments from Federal Reserve officials have played a significant role in shaping investor sentiment. On Monday, Federal Reserve Chairman Jerome Powell acknowledged progress on inflation but emphasized that rate decisions would be made on a meeting-by-meeting basis. This cautious approach by the Fed has left traders guessing about the future direction of U.S. interest rates.
Adding to the uncertainty, San Francisco Fed President Mary Daly echoed Powell’s sentiments, further emphasizing the absence of fixed guidance on rate cuts. This cautious stance has kept traders on edge, leading to increased volatility in the EUR/USD pair.
What the Market Expects: A Closer Look at Upcoming Events
Market participants are closely watching the upcoming U.S. Retail Sales data release, which will conclude a series of important economic data releases. The anticipation is that U.S. Retail Sales will remain unchanged at 0.0% month-over-month in June, indicating a continued slowdown in economic activity. This data will be crucial in shaping market expectations for future Fed rate decisions.
EURUSD is moving in Symmetrical Triangle and market has reached lower high area of the pattern
According to the CME’s FedWatch Tool, there is a strong expectation that the Federal Reserve will implement a rate cut in September. Rate traders are pricing in a 100% chance of at least a 25 basis point cut when the Federal Open Market Committee (FOMC) meets on September 18. This expectation has added to the pressure on the U.S. dollar, influencing the EUR/USD pair.
On the other side of the Atlantic, euro traders are eagerly awaiting the European Central Bank’s (ECB) latest rate call on Thursday. While a follow-up rate cut to June’s quarter-point trim is anticipated, it is not expected until September. Market participants are also eyeing a potential third rate cut in December. The ECB has signaled its preference to make interest rate decisions at forecast meetings in September and December, avoiding changes in July, October, or January.
ECB’s Upcoming Rate Call: What to Expect
The ECB’s rate call is a significant event that could impact the EUR/USD pair. As noted by Pimco Executive Vice President and Portfolio Manager Konstantin Veit, the ECB has clearly indicated its preference for making interest rate decisions during forecast meetings. This means that traders are unlikely to see any major changes in July, with the focus shifting to September and December.
The anticipation of a rate cut by the ECB in September has already influenced market sentiment. Traders are positioning themselves accordingly, leading to increased volatility in the EUR/USD pair. The ECB’s cautious approach, coupled with the Fed’s meeting-by-meeting stance, has created a complex landscape for traders to navigate.
EURUSD is moving in Ascending channel
Navigating the EUR/USD Market: Key Takeaways
So, what does all this mean for traders? Here are some key takeaways:
- Expect Volatility: With significant economic events on the horizon, volatility in the EUR/USD pair is likely to remain high. Traders should be prepared for sharp price movements and potential reversals.
- Watch the Data: Keep a close eye on upcoming economic data releases, particularly U.S. Retail Sales and the ECB’s rate call. These events will provide important clues about the future direction of the pair.
- Monitor Fedspeak: Comments from Federal Reserve officials can have a significant impact on market sentiment. Pay attention to any statements or speeches that could provide insights into the Fed’s future actions.
- Prepare for Rate Cuts: The market is pricing in rate cuts from both the Federal Reserve and the ECB. This expectation has already influenced the EUR/USD pair and will continue to play a role in its movement.
- Manage Risk: Given the current uncertainty, risk management is crucial. Use appropriate stop-loss orders and position sizing to protect your capital.
Final Summary
In conclusion, the EUR/USD pair is at a critical juncture, struggling to break past the 1.0900 level. The influence of Fedspeak, coupled with upcoming economic data releases and central bank decisions, has created a volatile trading environment. Traders should stay informed, be prepared for sharp price movements, and manage their risk carefully. With significant events on the horizon, the EUR/USD pair is likely to remain in the spotlight, providing both challenges and opportunities for traders.
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