(Ipek Ozkardeskaya – Swissquote Bank Ltd)
The week starts on a positive note, after the major US and European indices ended up last Friday on a good rebound.
Investors remain focused on earnings this week, to determine which companies are in a better position to weather the difficult macroeconomic environment, and the rising interest rates. Bank of America, Goldman Sachs, Netflix, Tesla, Philip Morris, Snap, American Express and Twitter are among the companies that will go to the earnings confessional this week.
Good news is that, the week starts with improved odds of seeing a 75bp hike at the next FOMC meeting, rather than a 100bp hike.
The US dollar bounced lower from a fresh 20-year high on Friday and is softer against most majors this morning. This week, the dollar traders will be watching the US housing data and the Philly Fed manufacturing index, and good data will likely be bad news for the Fed watchers, as it would revive the odds of a 100bp hike at next Fed meeting.
In Europe, investors will watch three important events: whether Mario Draghi quits the Italian government, whether the Nordstream 1 pipeline reopens, and the European Central Bank (ECB) much-awaited, first rate hike!
EURUSD Forecast: Euro closes in on key resistace
(Eren Sengezer – FXStreet)
– EURUSD has extended its rebound at the start of the week.
– 1.0170 aligns as the next critical technical resistance.
– Risk perception should impact continue to impact the market action on Monday.
EUR/USD has gathered recovery momentum at the beginning of the week and climbed above 1.0100. The pair faces important resistance at 1.0170 and a four-hour close above that level could open the door for additional gains.
The broad-based dollar weakness fuels EUR/USD’s upside early Monday. After the University of Michigan’s Consumer (UoM) Sentiment Survey showed on Friday that the long-run inflation expectation declined to 2.8% in July’s flash estimate from 3.1% in June, investors started to reassess the Fed’s rate outlook.
According to the CME Group’s FedWatch tool, the probability of a 100 basis points rate hike in July declined below 30% from nearly 90% on Thursday. In addition to the UoM data, cautious comments from Fed officials caused the greenback to continue to lose interest.
Regarding the July rate decision, “moving too dramatically could undermine positive aspects of the economy, add to the uncertainty,” said Atlanta Fed President Raphael Bostic. Similarly, San Francisco Fed President Mary Daly noted that they are not looking to raise rates to extreme highs. Reflecting the negative impact of the repricing of the Fed’s July rate decision, the US Dollar Index is already down more than 1% from the multi-decade high it set at 109.29 last Thursday.
There won’t be any high-tier data releases featured in the economic docket on Monday and the greenback could stay on the back foot if risk flows continue to dominate the market action. As of writing, US stock index futures were up between 0.7% and 1%.
EURUSD Technical Analysis
EUR/USD broke above the 20 and the 50-period SMAs on the four-hour chart. Confirming the bullish tilt, the Relative Strength Index (RSI) indicator on the same chart climbed toward 60. On the upside, 1.0170 (Fibonacci 38.2% retracement of the latest downtrend) aligns as key resistance. In case buyers manage to flip that level into support, additional gains toward 1.0200 (psychological level), 1.0225 (Fibonacci 50% retracement) and 1.0275 (Fibonacci 61.8% retracement) could be witnessed.
1.0100 (50-period SMA, Fibonacci 23.6% retracement, psychological level) forms key support before 1.0060 (20-period SMA) and 1.0000.
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