EUR/USD analysis: eyes on 1.035 with 50bps hike?
The US dollar shows no signs of rebound following a three-day losing streak, with 
EUR/USD breaking above the 1.02 barrier yesterday and surging to 1.024 as of this writing, boosted by rising speculation of a half-percentage point hike at tomorrow’s ECB meeting.
The case for a hawkish half-point increase has gathered traction over the past hours following rumours disclosed by Reuters yesterday. On top of that, theEurozone’s inflation rate reached an all-time high of 8.6 percent in June, and the EUR/USD hit parity last week.
Meanwhile, political tensions in Italy have subsided as Prime Minister Mario Draghi, who resigned last week, has decided to remain in office pending the formation of a new broad parliamentary coalition. This helps to stabilise the euro by reducing the possibility of populist backlash in Italy.
EUR/USD chart analysis
The hammer candlestick formation that occurred on July 14 on theEUR/USD daily chart prompted a short-term trend reversal for the pair, which is currently enjoying its fourth session in the green.
A positive close today would beEUR/USD’s best streak since early February. The 14-day RSI, after rebounding from extreme oversold levels, is still trading below the 50 mark, meaning the bulls are not yet in full control.
The MACD instead produced the bullish signal, with the MACD line crossing from below to above the signal line.
The underlying trendline remains bearish, although an attempt to 1.035 (May and June support) is likely if the ECB announces a half percentage point hike tomorrow. The breakout of the bearish trendline above 1.046 is more challenging, at least in the short term. On the negative side, parity levels might be retested if the ECB fails to deliver a hawkish message tomorrow.
Idea written by Piero Cingari, forex and commodities analyst at Capital.com
EUR/USD breaking above the 1.02 barrier yesterday and surging to 1.024 as of this writing, boosted by rising speculation of a half-percentage point hike at tomorrow’s ECB meeting.The case for a hawkish half-point increase has gathered traction over the past hours following rumours disclosed by Reuters yesterday. On top of that, the
Eurozone’s inflation rate reached an all-time high of 8.6 percent in June, and the EUR/USD hit parity last week.Meanwhile, political tensions in Italy have subsided as Prime Minister Mario Draghi, who resigned last week, has decided to remain in office pending the formation of a new broad parliamentary coalition. This helps to stabilise the euro by reducing the possibility of populist backlash in Italy.
EUR/USD chart analysis
The hammer candlestick formation that occurred on July 14 on the
EUR/USD daily chart prompted a short-term trend reversal for the pair, which is currently enjoying its fourth session in the green.A positive close today would be
EUR/USD’s best streak since early February. The 14-day RSI, after rebounding from extreme oversold levels, is still trading below the 50 mark, meaning the bulls are not yet in full control.The MACD instead produced the bullish signal, with the MACD line crossing from below to above the signal line.
The underlying trendline remains bearish, although an attempt to 1.035 (May and June support) is likely if the ECB announces a half percentage point hike tomorrow. The breakout of the bearish trendline above 1.046 is more challenging, at least in the short term. On the negative side, parity levels might be retested if the ECB fails to deliver a hawkish message tomorrow.
Idea written by Piero Cingari, forex and commodities analyst at Capital.com
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