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Asset Watch
Wednesday, July 27, 2023
The US dollar experienced a decline following the statements made by the Federal Reserve Chairman during the press conference that followed the US interest rate decision. Chairman Powell’s stated that he could be a “little patient” with current inflation levels, suggesting that the central bank may wait for inflation to decrease without the need for further rate hikes i.e. the Fed might have completed its series of rate increases.
The Euro managed to recover some of its losses from the previous week on the weaker US Dollar. However, the focus now shifts to the European Central Bank meeting, where the market anticipates a 25-basis points interest rate hike. Investors will be closely watching the ECB President’s press conference at 6:15 pm UAE time to get more forward guidance. The market will pay attention to any indications regarding the possibility of continuing rate hikes in September or pausing after today’s decision.
The ECB is facing a significant challenge since European inflation levels remain far from the 2% target and this may require further tightening of monetary policy. However, the ongoing series of interest rate hikes has the potential to negatively impact growth levels and may push the eurozone economy into a recession, especially considering the contraction of the industrial sector and the sustained PMI readings below 50, indicating economic contraction.
Chart source ADSS Platform
On July 18 the EUR/USD rallied to an over year and a half high at 1.1276 then retreated as some traders took profits.
Currently, the price has broken above 1.1110 level and may be on the way to a test of 1.1176 Therefore, a daily close above that level could encourage some traders to rally the price even higher towards 1.1309. That said, the resistance level located at July 18 high mentioned above should be considered.
On the other hand, a daily close below 1.1060 could send the price even lower towards 1.0873. Nonetheless, the support area between (1.1020- 1.0996) and the support level at the 50- day simple moving average should be monitored.
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