Key Points
- This week’s key market drivers for the EUR/USD are J. Powell’s Congressional testimony (Tuesday/Wednesday) and US CPI (Thursday).
- The EUR/USD is up more than 160 pips in the past two weeks.
- Macro resistance is present at the 1.0860 area.
Market Overview
It’s been a bullish open to the week for the EUR/USD. At press time, rates are in the green and holding above the 1.0800 threshold. Bidders continue to engage this market as a key period on the economic calendar draws near.
J. Powell Testifies
Twice each year, the US Federal Reserve Chair testifies before Congress regarding the health of the US economy and the future of monetary policy. For 2024, this bi-annual engagement is due to take place this week. Beginning Tuesday, Jerome Powell will make the trek to Capitol Hill to fill members of Congress in on America’s financial situation.
Most of the time, a Fed Chair’s testimony is more about politics and less about policy. While 2024 is likely to be no different, major questions surrounding the future of Fed rate cuts will be on the front burner. Currently, the markets are pricing in a nearly 70% chance of a September rate cut; if Powell disturbs these expectations, the markets will experience heavy volatility. It’s wise to be ready for anything as J. Powell testifies on Tuesday and Wednesday.
EUR/USD Technical Outlook
The past several weeks have been golden for EUR/USD bulls. Prices have risen from lows just above 1.0660 to highs north of 1.0825. The move has been significant and signals summertime weakness for the USD.
If the rally continues, a nice sell from the Weekly 78% Retracement may set up later this week. Shorting the 1.0860 area isn’t a bad way to trade the action, given the opportunity. With an initial stop-out zone around 1.0889, this trade has a positive chance at 25 pips on a slightly sub-1:1 risk vs. reward ratio.
CPI Rules!
Thursday’s US CPI report is the largest market driver this week for the EUR/USD. Inflation is the number one market driver on the forex market—will CPI send the majors reeling once again?
Perhaps. Analysts project June’s CPI to come in at 0.1%, up from 0.0% in May. On a yearly basis, CPI is projected to fall from 3.3% to 3.1%. No matter where CPI lands, the EUR/USD is sure to be on the move Thursday. If you’re trading the eurodollar, it will pay to manage risk aggressively ahead of, at, and after the 8:30 AM EST Thursday CPI release.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
