Euro / U.S. DollarShort
EUR/USD Extends Weekly Rally, Hawkish ECB Rhetoric Supports Euro
The EUR/USD currency pair continued its upward momentum throughout the week and reached its highest level since May 11, peaking at 1.0962 on Friday, before experiencing a modest retreat. The Euro's outperformance against its counterparts can be attributed to the hawkish rhetoric from the European Central Bank (ECB). However, when considering the technical outlook, there are indications of overbought conditions in the near term.
As anticipated, the ECB implemented a 25 basis points (bps) rate hike in June. The policy statement revealed that the Eurosystem staff had revised their core inflation projections for 2023 and 2024 upward. During the post-meeting news conference, ECB President Christine Lagarde all but confirmed the likelihood of another 25 bps hike at the upcoming meeting.
Lagarde explicitly stated, "Barring a material change to our baseline, it is very likely the case that we will continue to raise rates in July, which probably doesn't come as a surprise," conveying a strong hawkish stance. She downplayed the softer Harmonized Index of Consumer Prices (HICP) readings from the Euro Area and reiterated the expectation that inflation will remain "too high for too long."
Lagarde's hawkish tone, combined with the upward revisions to inflation forecasts, served as catalysts for the EUR/USD rally observed on Thursday. From a technical perspective, it is worth noting that the currency pair may encounter a rebound around the 78.6% and 88.6% Fibonacci levels, allowing for a brief pause or consolidation before potentially resuming its upward trajectory.
Traders and analysts will closely monitor how the EUR/USD reacts to these key Fibonacci levels, as they can provide valuable insights into potential market dynamics. It is crucial to consider risk management strategies and observe other supporting technical indicators to make well-informed trading decisions.
As the market unfolds, the EUR/USD's performance will be closely scrutinized, assessing whether it experiences the anticipated rebound before potentially continuing its upward trend.
As anticipated, the ECB implemented a 25 basis points (bps) rate hike in June. The policy statement revealed that the Eurosystem staff had revised their core inflation projections for 2023 and 2024 upward. During the post-meeting news conference, ECB President Christine Lagarde all but confirmed the likelihood of another 25 bps hike at the upcoming meeting.
Lagarde explicitly stated, "Barring a material change to our baseline, it is very likely the case that we will continue to raise rates in July, which probably doesn't come as a surprise," conveying a strong hawkish stance. She downplayed the softer Harmonized Index of Consumer Prices (HICP) readings from the Euro Area and reiterated the expectation that inflation will remain "too high for too long."
Lagarde's hawkish tone, combined with the upward revisions to inflation forecasts, served as catalysts for the EUR/USD rally observed on Thursday. From a technical perspective, it is worth noting that the currency pair may encounter a rebound around the 78.6% and 88.6% Fibonacci levels, allowing for a brief pause or consolidation before potentially resuming its upward trajectory.
Traders and analysts will closely monitor how the EUR/USD reacts to these key Fibonacci levels, as they can provide valuable insights into potential market dynamics. It is crucial to consider risk management strategies and observe other supporting technical indicators to make well-informed trading decisions.
As the market unfolds, the EUR/USD's performance will be closely scrutinized, assessing whether it experiences the anticipated rebound before potentially continuing its upward trend.
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