Euro meets some initial hurdle near 1.1240

• Euro comes under pressure following new highs vs. the US Dollar.
• Stocks in Europe open mixed at the end of the week.
• EUR/USD advances to the 1.1240/45 band earlier on Friday.
• EMU Balance of Trade will be the only release in the domestic docket.
• Flash US Consumer Sentiment takes centre stage across the pond.

The Euro (EUR) seems to have met some initial resistance around the 1.1240 region vs. the US Dollar (USD) so far on Friday.

In fact, after reaching new highs in the 1.1240/45 band earlier in the Asian trading hours, EUR/USD now seems to have taken a breather amidst a marginal recovery attempt in the Greenback.

Despite the so-far lacklustre bounce, the US Dollar remains under heavy pressure as investors continue to anticipate the likelihood that the Federal Reserve might be nearing the end of its tightening campaign. This view has been reinforced as of late on the back of further signs of cooling US consumer prices as well as the persistent downtrend in producer prices.

In the meantime, comments by the FOMC’s Governor Christopher Waller late on Thursday fell in line with the persevering hawkish narrative from his colleagues at the Committee after he suggested that the Fed might need two more rate hikes this year.

The strong upside impulse in the pair has been reinvigorated in response to lower-than-expected US inflation figures for the month of June, which, firstly, confirm that disinflationary forces remain well in place in the US economy and, secondly, underpin expectations that the Federal Reserve might end its ongoing hiking campaign sooner rather than later.

So far, market participants have already largely priced in a quarter-point rate hike by both the European Central Bank (ECB) and the Fed at their meetings later in the month, in a context where the potential future actions of the Fed and the ECB in normalizing their monetary policies continue to be a topic of discussion, especially with increasing concerns about an economic slowdown on both sides of the Atlantic.

In the domestic calendar, EMU’s Balance of Trade will be the sole release, whereas the advanced Michigan Consumer Sentiment will be in the limelight later in the NA session. 

Daily digest market movers: Euro looks to consolidate the break above 1.1200

• The EUR treads water around 1.1230 vs. USD on Friday.
• Fed’s Waller favoured two more rate hikes by the Fed this year.
• The USD Index drops to new 15-month lows near 99.60.
• The Fed and the ECB are seen hiking rates by 25 bps this month.
• Oil, Gold retreats marginally during the European morning.

Technical Analysis: Euro sees the next up-barrier near 1.1500

The ongoing price action in EUR/USD hints at the idea that further gains might be in store in the short-term horizon. However, the current pair’s overbought condition (as per the daily RSI well above 70) opens the door to a potential near-term corrective move.

The pair printed a new 2023 high at 1.1243 on July 14. Once this level is cleared, there are no resistance levels of significance until the 2022 peak of 1.1495 recorded on February 10.

On the downside, the 1.1000 region emerges as a psychological support seconded by interim contention at the 55-day and 100-day SMAs at 1.0881 and 1.0852, respectively, ahead of the July low of 1.0833 (July 6) . The breakdown of this region should meet the next contention area not before the May low of 1.0635 (May 31), which also looks underpinned by the crucial 200-day SMA (1.0651). South from here emerges the March low of 1.0516 (March 15) prior to the 2023 low of 1.0481 (January 6).

Furthermore, the constructive view of EUR/USD appears unchanged as long as the pair trades above the key 200-day SMA.