EUR/USD Current price: 1.1809
- US President Donald Trump demands the Federal Reserve to lower interest rates.
- European inflation rose in line with expectations in June, according to the HICP estimate.
- EUR/USD is at risk of correcting overbought conditions, but higher highs are still likely.
The EUR/USD pair retains gains near multi-year highs, trading at around 1.1800 and heading towards the September 2021 high of 1.1908. The US Dollar (USD) keeps suffering from mounting tensions between the United States (US) President Donald Trump and the Federal Reserve (Fed) Chair Jerome Powell.
President Trump demands that Powell trim the benchmark interest rates, something that Powell & co are unwilling to do, given the uncertainty over the inflation outlook related to Trump’s tariffs.
Trump announced tariffs on pretty much every trading counterpart, with a universal base levy of 10%. However, right after the announcement, he also announced a 90-day pause aimed at reaching trade deals. Time runs fast, and the July 9 deadline is around the corner with not much progress in negotiations.
European Commission President Ursula von der Leyen noted last week that the EU was ready for a deal with the US, yet clarified that the Commission “will defend the European interest as needed. In short, all options remain on the table.” The EU is seeking exceptions on the 10% baseline tariff, while most likely applying retaliatory tariffs.
Meanwhile, the EU published the preliminary estimate of the June Harmonized Index of Consumer Prices (HICP). Inflation, as measured by the index, rose by 2.3% from a year earlier, matching the previous reading. The monthly advance accounted for 0.3% following a flat figure in the previous month. The core annual reading hit 2% as expected, although slightly above the previous 1.9%.
Other than that, the Hamburg Commercial Bank (HCOB) released the final estimate of the June Manufacturing Purchasing Managers’ Index (PMI) for all EU economies. The Union’s index was revised from 49.4 to 49.5, still indicating contraction in the sector.
Multiple central banks’ leaders will be on the wires amid the European Central Bank (ECB) Forum on Central Banking, in Sintra. ECB President Christine Lagarde and Fed Powell’s comments could take their toll on EUR/USD, particularly if they refer to monetary policy. The US calendar also includes the June ISM Manufacturing PI, and the May JOLTS Job Openings report.
EUR/USD short-term technical outlook
The EUR/USD pair is up for the ninth consecutive day, which increases the risk of a corrective slide, although there are no clear technical signs supporting it. In the daily chart, the pair trades near an early peak at 1.1830, with the Relative Strength Index (RSI) indicator heading north at around 75. The Momentum indicator, in the meantime, pared its advance but holds well into positive territory. Finally, the pair develops far above all its moving averages, with the 20 Simple Moving Average (SMA) currently at around 1.1550.
The near-term picture is pretty similar. Technical indicators in the 4-hour chart are mildly bullish within overbought levels, suggesting buyers still hold the grip. At the same time, the EUR/USD pair develops well above bullish moving averages, supporting the case for higher highs ahead.
Support levels: 1.1770 1.1735 1.1695
Resistance levels: 1.1830 1.1880 1.1910
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