The EUR/USD pair clings to slight gains around 1.1220, marking its first daily profits in three sessions as Thursday’s European session begins. The Euro benefits from the overall weakness of the US Dollar, showing little concern for the mixed worries surrounding the Eurozone.
Reuters’ analysis highlights the Eurozone’s grim employment conditions due to multi-year high inflation and the ongoing Ukrainian war, which dampens optimism within the bloc.
European Central Bank (ECB) Governing Council member Yannis Stournaras expressed uncertainty about further rate hikes after a 25 bps increase next week, citing concerns about falling inflation and potential damage to the economy.
Comparatively, doubts about the economic transition in the US keep the EUR/USD pair firmer, especially as market expectations suggest a policy pivot by the Fed after July, while the ECB’s stance is slightly less dovish.
In contrast, the US Dollar Index (DXY) declines by 0.25% intraday, revisiting the 100.00 mark, reversing its two-day rebound from the lowest level seen since April 2022. The greenback’s performance reflects the impact of weak US housing data and mixed concerns about the Fed’s future actions, as well as overlooking optimism at US banks.
Recent concerns about US-China tensions, stemming from comments by Chinese diplomats and actions by the US House of Representatives regarding outbound investments and AI chips, contribute to the recent boost in EUR/USD bulls.
In the wider market, the S&P 500 Futures show modest losses, while US Treasury bond yields trade with a mixed performance at weekly lows.
Looking ahead, the preliminary readings of Eurozone’s Consumer Confidence for July will precede the US Initial Jobless Claims and Existing Home Sales data on the economic calendar. However, the focus remains on risk catalysts for clearer market directions.
If the scheduled EU readings come in stronger, the EUR/USD could surpass the key 1.1280 hurdle, driven by broad US Dollar weakness. Conversely, weaker data and sentiment in the US may not prompt bearish momentum unless they boost the greenback.
Technical analysis reveals that the EUR/USD pair’s successful trading above the support confluence at 1.1145-40, which includes the 10-day moving average and a previous resistance line from February, allows the Euro pair to target the 1.1280 resistance zone, levels last seen in early 2022. However, near-overbought RSI conditions present a challenge to the pair’s further upside beyond 1.1280.
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