EUR/USD Analysis Today- 18/07: Cautious Focus On ECB (Chart)

(MENAFN- Daily Forex)

• The trading week was broadly positive for the Euro against the US Dollar (EUR/USD), with gains extending to the 1.0948 resistance level, the highest for the pair in four months.
• It currently sits around 1.0935 as of this analysis, amidst cautious anticipation of the European Central bank (ECB) announcement today.
• According to Forex trading platforms, the selling of the US Dollar following the UK's inflation data has contributed to the rise in the EUR/USD exchange rate.
  

In general, the US dollar is exposed to broad pressures as foreign exchange markets forex move in the mid-week session, with the rise in the exchange rate of the pound sterling/US dollar and the potential intervention in the foreign exchange market by the Bank of Japan, which strengthens the value of the euro. The selling of the dollar came in the wake of the release of a strong number for service inflation in Britain, which reduced the chances of an interest rate cut on August 1 by the Bank of England.

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Overall, traders say the initial weakness in the US dollar appears to have prompted a response from the Bank of Japan, which bought yen and sold dollars in order to boost the value of its currency. The combined weight of the US dollar selling has caused technical levels in the dollar index – a measure of the broader dollar's ​​value – to falter, which in turn has weighed on the euro versus the dollar.

Additionally, former US President Donald Trump and his deputy J.D. Vance argued that the US Dollar should be weaker to support American exports. Euro gains come just hours before the ECB's decision today, where it is expected to keep interest rates unchanged. Clearly, market attention will focus on whether the ECB indicates comfort with a second rate cut at its September meeting.

September is already seen as a likely next move (80% chance), meaning the euro will see limited downside if markets fully price in a September cut after the next meeting.

On the economic calendar front, Eurozone inflation was confirmed. According to an official announcement, the annual inflation rate in the euro area was confirmed at 2.5% in June 2024, down from 2.6% in May and 5.5% a year earlier. Also, Energy prices fell (0.2% versus 0.3%) and food, alcohol and tobacco (2.4% versus 2.6%). On the other hand, inflation remained stable in services (4.1%) and non-energy industrial goods (0.7%). Compared to the previous month, the consumer price index rose by 0.2%, the same level as in May and also in line with preliminary estimates. Meanwhile, core consumer prices, which exclude energy, food, alcohol and tobacco, rose by 2.9% year-on-year, the same level as in May. Among the bloc's largest economies, inflation slowed in Germany (2.5% vs. 2.8%), France (2.5% vs. 2.6%) and Spain (3.6% vs. 3.8%) but rose in Italy (0.9% vs. 0.8%).
EUR/USD Technical analysis and forecast:

According to the performance on the daily chart above, the upward shift in the EUR/USD price is underway and the bulls' control over the trend will strengthen by moving through the psychological resistance of 1.1000. technically, breaking it will move the technical indicators towards overbought levels. On the other hand, if the EUR/USD price returns to the support of 1.0790, it will be a threat to the current upward rebound. Meanwhile, the EUR/USD price will be directly affected by the announcement of the European Central Bank and the statements of its Governor Lagarde. In addition to the announcement of the number of American jobless claims.

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