Published: June 28th, 2022
In the latest testimony, Fed Chairman Jerome Powell said that the current rate hike would be an appropriate decision to bring inflation down. He also mentioned that the Fed stepped back from the data dependency regarding the future rate hike pace and added that the current data showed a better than expected GDP in the current quarter. In addition, consumers remained strong while the housing sector softened a bit.
According to the University of Michigan’s survey, the 5-year inflation expectation reached 3.1% against the 3.3%. It is a valuable report for the Fed that pushed the Fed chair to raise the interest rate by 75 bps at the June meeting.
On the other hand, the ECB policymaker Kazak said that there would be an additional 25 bps rate hike in July, followed by another 50 bps hike in September. ECB president Christine Lagarde confirmed that the European would likely raise the 25 bps rate hike in July and further hikes in the coming quarter. Now the real question is whether those rate hikes would control inflation or not.
As per the recent Preliminary Data, the Eurozone economy started showing demand destruction due to the higher cost of living. Manufacturing and services came below the expectation while the business and consumer confidence are declining. Let’s see the future price direction from the EURUSD Technical analysis:
According to the daily chart, the broader market direction for the EURUSD pair is although the recent bearish pressure below the dynamic 20 EMA failed to form a new swing low. As the fed rate hike appeared at 75 bps, EURUSD spiked lower with a failure to break below the 1.0345 level and rebounded higher. However, on the upside, the price showed less interest in bulls after testing the 1.0604 resistance level.
The above image shows how the price trades above the dynamic 20 EMA with a corrective momentum while the current price remained below the 1.0604 resistance level. On the other hand, the indicator window shows a neutral momentum where the current RSI level is at 50 area from where a solid breakout is needed.
Based on the daily structure, investors should wait for a strong bearish daily candle below the dynamic 20 EMA before considering it a bearish opportunity. In that case, the primary aim is to test the 1.0345 swing low in the coming days.
According to the Ichimoku cloud, the broader market context for the EURUSD price is corrective. The price moved above the Kumo Cloud but traded within an ascending triangle. On the other hand, the future cloud is bullish, where Senkou Span A and Senkou Span B are aimed higher. The lagging Span is closer to the price, indicating a corrective momentum.
The above image shows how the price trades above the Kumo Cloud while the dynamic Tenkan Sen and Kijun Sen remain below the price. In the indicator window, the Traders Dynamic Index is also supportive for bulls as it remained above the neutral 50.00 level for a considerable time.
Based on the h4 structure, investors should wait for a strong bearish recovery with a bearish H4 candle below the 1.0530 static level. In that case, the primary aim of the price is to test the 1.0345 support level in the coming days. The alternative approach is to wait for a bullish rejection from the dynamic Kijun Sen and aim for testing the 1.0783 swing high.
According to the EURUSD intraday chart, the current price trades within an extreme correction where the recent visible range high volume level is below the current price. Moreover, the gap between the current price and visible range volume is higher where a bearish correction is pending. The latest intraday high volume level is above the price and shows sellers' presence in the H1 chart.
The above image shows how the MACD Histogram turned bearish while the MACD line was above the neutral line. Moreover, the dynamic 20 EMA and weekly VWAP are above the price and working as minor resistances. Based on the current structure, the current outlook of the EURUSD price is bearish as long as it remains below the dynamic weekly VWAP. in that case, the main aim is to test the 1.0518 high volume level before showing a bullish correction.
Based on the current price action, EURUSD has a higher possibility of extending the current bearish trend in the coming days. The main aim of the current selling pressure is to test the 1.0345 swing low from where a bullish correction may appear.