Outside of the descending regression channel that dates back to late June, the EUR/USD is trading sideways. However, the Relative Strength Index (RSI) indicator on the four-hour chart continues to be considerably below 50, indicating that buyers are still holding back.
In the ascending direction, 1.0050 (20-period SMA) aligns as immediate resistance before 1.0080 (static level), 1.0100 (psychological level), and 1.0120 (50-period SMA).
0.9950 (static level, low from July 14) and 0.9900 could be the targets if the pair reverts to trading below parity within the falling channel (psychological level).
After plummeting to its lowest point in over 20 years at 0.9952 on Thursday, the EUR/USD managed to launch a comeback and remained above parity throughout the European session. The pair is still at the mercy of the value of the dollar, and it is likely to come under fresh bearish pressure if investors begin to bet on a 100 basis point rate hike in July following the US data.
Christopher Waller, the governor of the Federal Reserve, warned on Thursday that markets may have anticipated too much when they priced in a 100 basis point (bps) rate increase for July following the inflation report. Investors cut back their expectations for retail sales and housing data, despite Waller's additional comment that he would tilt toward a larger-than-75 bps rate increase.
The chance of a 100 bps rate hike at the next meeting is currently about 50%, according to the CME Group FedWatch Tool, down from around 90% on Thursday during European trading hours.
After a 0.3 percent fall in May, the US Census Bureau will announce June retail sales statistics later in the day. These figures are anticipated to grow by 0.8 percent on a monthly basis. A stronger-than-expected result might lead to another dollar spike and pressure on the pair, since Waller expressly cited this data on Thursday.
The Consumer Sentiment Survey from the University of Michigan (UOM) will also be discussed on the US economic docket. In the flash estimate for July, the headline Confidence Index is anticipated to drop to a record-low 49.9. The inflation expectations component over the next five to ten years will be closely watched by market participants. Long-term expectations decreased from their mid-month reading of 3.3 percent and settled at 3.1 percent, returning to the 2.9-3.1 percent range seen over the previous ten months, the UOM said in June. Therefore, a reading above 3.1% might increase the likelihood of a 100 basis point rate hike in July and help the dollar close the week on a strong note. However, a reading within the 10-month range would make it challenging for the dollar to find demand and support. EUR/USD
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