EURUSD Price recovery pokes 1.0100 as bulls brace for ECB during pre-Fed blackout

• EURUSD Price remains firmer amid cautious optimism, easing hawkish Fed bets.
• Softer US data, Fed blackout period joins mixed Fedspeak to ease fears of 1.0% Fed rate hike.
• ECB to begin rate hikes with 0.25% increase even if recession fears loom.

EURUSD Price extends the previous day’s recovery as buyers attack the 1.0100 threshold during Monday’s initial Asian session. In doing so, the major currency pair cheers easing concerns over the Federal Reserve’s (Fed) 100 bps rate hike while bracing for the European Central Bank (ECB) monetary policy meeting.

US Dollar Index weakness could also be linked to the EURUSD Price strength as the quote rises for the second consecutive day. In doing so, the pair ignores recession fears emanating from Germany and Italy while cheering downbeat US data and mixed Fedspeak.

Also read: EUR/USD Weekly Forecast: Gear up for a too conservative ECB meeting

EURUSD Price cheers mixed Fedspeak

Fed policymakers are on a blackout period ahead of late July monetary policy meeting.

During the latest Fedspeak, the last before the pre-Fed blackout, the majority of the policymakers tried to tame the hopes of a 1.0% hike in the benchmark interest rates, which in turn enabled the EURUSD Price to consolidate losses around a multi-month low. Atlanta Fed President Raphael Bostic said on Friday that June's 75 basis points rate hike was a "big move" and added that the Fed wants policy transition to be orderly, as reported by Reuters. On the other hand, San Francisco Fed President Mary Daly said on Friday that the "Fed is working on getting down inflation without stalling economy." Further, St. Louis Federal Reserve Bank President James Bullard sounded neutral as he said, per Reuters, on Friday that it wouldn't make too much of a difference to do a 100 basis points (bps) or a 75 bps rate hike at the next meeting. In this regard, Wall Street Journal’s (WSJ) Nick Timiraos also came out with a piece that turned down the market’s expectations of a 1.0% Fed rate hike.

Downbeat US data favor EURUSD bulls

On Friday, the Index of Consumer Expectations declined to its lowest level since May 1980 at 47.3. The downbeat figures also joined a 0.20% contraction by the US Industrial Production for June to favor EURUSD buyers. Elsewhere, US Retail Sales for June grew 1.0% MoM versus 0.8% expected and -0.1% prior (revised from -0.3%) whereas the University of Michigan's Consumer Confidence Index edged higher to 51.5 in July's flash estimate, versus 49.9 expected and 50.0 prior.

Fears of US recession also weigh on DXY

Fears of a second negative GDP print, which technically propels US recession fears, appeared to have gained momentum after Friday’s Atlanta Fed GDPNow release. That said, the Atlanta Fed GDPNow estimate for 2Q growth is coming in at -1.5% versus -1.2% last. The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -1.5 percent on July 15, down from -1.2 percent on July 8.

Germany, Italy could probe ECB hawks

The gas crisis in Germany joins Italy’s political drama to challenge the European Central Bank (ECB) hawks as they brace for the first rate hike in many years. Recently, the Financial Times (FT) quoted German Economy Minister Robert Habeck as he said, “We just don’t know. Everything is possible,” when asked what will happen as the 10-day scheduled maintenance to the Nord Stream 1 pipeline ends on July 21. Elsewhere, Politico marked more political jitters in Italy, after Prime Minister Mario Draghi offered his resignation but was rejected, to signal more pain for the nation and the bloc, which in turn could weigh on the EURUSD Price. “Mario Draghi’s Italian government tilted even further toward collapse Sunday, as the leaders of the two right-wing parties within the ruling coalition said they could no longer work with the 5Star Movement,” mentioned Politico.

ECB eyed but PMIs are important too

Preliminary Purchasing Managers Index (PMI) readings of July will also be important for the pair watchers, in addition to the ECB, amid an absence of Fedspeak and a light calendar in the US before then. Forecasts suggest reductions in the headline PMIs but any upside surprises from the US could quickly recall EURUSD bears amid more fears of an economic slowdown from the bloc than the US. That said, th ECB is up for 0.25% rate hike but chatters over the aggression in the rate hikes will highlight President Christine Lagardge's press conference for fresh moves.

EURUSD Price technical outlook

EURUSD Price justifies Thursday’s bounce off 61.8% Fibonacci Expansion (FE) of March-May 2022 moves, as well as an upside break of a two-week-old descending trend line, as bulls attack the 50-SMA hurdle surrounding 1.0100.

Given the recently improving RSI and MACD conditions, in addition to the aforementioned recovery moves, EURUSD can easily overcome the immediate 50-SMA resistance surrounding 1.0105. The breakout could lead the major currency pair towards the 38.2% Fibonacci retracement of June 27 to July 14 declines, around 1.0200.

It’s worth noting that the pair buyers could remain cautious unless witnessing a clear upside break of 1.0285 resistance confluence, comprising the 100-SMA and 50% Fibonacci retracement level.

Alternatively, pullback moves need a clear downside break of the 0.9950 mark including the latest low, as well as the 61.8% FE of March-May 2022 moves. Following that, the December 2002 low near 0.9860 will gain the market’s attention.

Draghi drama is a problem for the ECB hawks