- The EUR/USD has surpassed the simple moving average (SMA) of 1.1704, reaching a daily peak of 1.1747.
- The US is expected to slow progress in trade talks with the EU. Trade relations with the Philippines are providing limited support for the dollar.
- The European Central Bank (ECB) noted its retention rate on July 24 as inflation nears its target while trade risks remain a concern.
The EUR/USD has been influenced by a growing risk appetite for the US dollar, with the 20-day SMA exceeding the 1.1704 mark. This is occurring despite the uncertainty surrounding whether the EU and the US will finalize their trade deal before the August 1 deadline. The pair is trading at 1.1747, having dipped to 1.1678 earlier in the day.
There hasn’t been much change in the financial markets for over a day now. US stocks have experienced mixed trading sessions. The focus remains on US trade news, particularly the announced deal with the Philippines, with no updates regarding EU negotiations.
US Treasury Secretary Scott Bescent mentioned that the White House prioritizes the quality of deals over timing. He noted that any decision on extending the deadline would ultimately come from Donald Trump.
On another note, according to Bloomberg, EU leaders are set to discuss defense and trade cooperation with their Japanese and Chinese counterparts this week, though expectations for meaningful discussions in Beijing seem limited.
Traders are keeping an eye on the upcoming ECB monetary policy announcement on July 24. Given the inflation rates nearing their target, central banks remain stable, though trade risks are ongoing.
This week’s EU Economic Docket will include consumer trust metrics, the Flash PMI for July, and the ECB’s monetary policy decisions. In the US, key releases will cover housing data, S&P Global Flash PMI, first-time unemployment claims, and durable goods orders.
Daily Digest Market Movers: EUR/USD rises amid USD weakness
- The US Dollar Index (DXY), which measures the dollar against a basket of six currencies, has dropped by 0.46% to 97.39, supporting the euro’s performance.
- Recent US economic data revealed a mixed landscape. While consumer sentiment saw improvement, inflation surged in June, driving the consumer price index (CPI) closer to 3%. The producer price index (PPI) suggested a slowdown, yet showcased the resilience of US consumers despite rising prices.
- Some EU diplomats have indicated that the bloc is exploring retaliatory measures against the US should the trade agreement fail. Potential actions may include tariffs on digital services, aerospace products, and bourbon. However, these measures might not sufficiently counterbalance the 30% tariff rate threatened by President Trump.
- The likelihood of the ECB maintaining its stance at the July 24 meeting stands at 57.5%, showing a decrease in the probability of a 0.25% cut from 37.5% just a day prior.
Technical Outlook: EUR/USD likely to test 1.1800 soon
The upward movement resumed after two consecutive days of gains, surpassing the 20-day SMA at 1.1709. Momentum appears to favor buyers, indicated by a rise in the relative strength index (RSI) towards the 60 mark.
Should the EUR/USD climb above 1.1750, expect a challenge at 1.1800, potentially reaching a year-to-date high of 1.1829. Conversely, if the pair dips below 1.1700, further declines are probable, with initial support at 1.1600 and a 50-day SMA at 1.1532 prior to 1.1500.
