Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

The EURUSD continued its slight decline from the 17-month high of $1.12758 achieved on July 18^. as investors focused on hawkish bets for the Federal Reserve and the ECB’s uncertain stance on future rate hikes. The US dollar rebounded after data showed that the US labour market remained tight in June. The unemployment rate held at 3.6%, while wages rose by 0.3%. These figures suggest that the Federal Reserve could continue to raise interest rates aggressively in an effort to cool inflation. 

The cross also weakened after the ECB made it clear that it would raise interest rates this month. However, ECB Council members also stated that tighter policy is being transmitted quickly, and there is no consensus on whether more rate hikes will be warranted for September. This uncertainty weighed on the Euro as the market priced in a lower probability of more rate hikes in the near future. 

Inflation in the Eurozone declined to a 17-month low of 5.5% in June. However, the core rate remained stubbornly high at 5.4%. This suggests that inflation in the Eurozone remains a significant challenge for the ECB. 

Technische Analyse 

The 4H chart shows that the price action has found support at the 50% Fibonacci retracement level following the bears’ attempt to push the price higher after the bulls faltered at the newly-created 17-month high of 1.2758 (green line). The price action is currently consolidating between the 50-EMA (blue line) and the 50% Fibonacci retracement level, which could act as levels of interest in the near term. 

A sustained push below the 50% Fibonacci retracement level could offer trading opportunities as the price action moves towards the 61.80% Fibonacci retracement level, which could act as a level of significance in the short term. A break below the level could trigger a selloff to lower levels, with the 1.10721 and 1.10139 support levels acting as levels of interest. 

However, a sustained push above the 50-EMA would bring the 23.60% Fibonacci retracement level at 1.2053 and the 17-month high into play. 

Zusammenfassung 

The lack of economic indicators from both economies has left the cross flat on Friday and on course for the first week of losses in four after declining over 0.9% this week. Should the bearish momentum persists and the price action sustains a break below the 50% Fibonacci retracement level, the price action would likely test the golden ratio lower. 

Quellen: TradingView, Reuters, CNBC