EUR/USD enters the final week of July at 1.1369, holding very close to the monthly low recorded in late June. A modest drop in energy prices on Friday trimmed expectations of an immediate Federal Reserve hike, yet markets still price at least one increase before the end of the year. On the H4 chart the pair’s consolidation range is nearing completion, with downside potential towards 1.1313.
EUR/USD enters the final week of July at 1.1369, pinned near the monthly low it recorded in late June. Friday’s modest decline in energy prices reduced expectations that the Federal Reserve could raise rates as early as its meeting on Tuesday and Wednesday. Yet markets continue to price in at least one Fed rate hike before the end of the year.
Tanker restrictions and US data support the dollar
Inflation risks have risen following a renewed escalation in the US–Iran conflict. Restrictions on the movement of energy tankers in the Persian Gulf and the Red Sea have pushed oil and fuel prices higher.
Strong US economic data adds further support for the dollar. S&P PMIs showed the fastest pace of private business activity growth this year. Meanwhile, the number of initial jobless claims fell at the fastest pace in nearly six decades, confirming the resilience of the labour market.
The 1.1336–1.1413 range nears completion
On the H4 chart, the market has formed a consolidation range around the 1.1389 level, currently extending between 1.1336 and 1.1413, and that range is nearing completion. An upside breakout would suggest a corrective move towards 1.1420, followed by a decline to 1.1313, while a direct downside breakout would open the way for a move to 1.1313. The MACD indicator supports that scenario, its signal line below zero and pointing firmly downwards, reflecting continued bearish momentum.
Shorter time frames point the same way. On the H1 chart the market has completed an upward move to the 1.1414 level, with a consolidation range now forming below it. Today’s expected path runs lower to 1.1390, then higher to 1.1420, then down to 1.1370, with scope for the trend to extend to 1.1313. The Stochastic oscillator confirms this scenario, its signal line below 80 and pointing downwards towards 20, indicating increasing short-term downside pressure.
The Federal Reserve meeting this week will be the key catalyst.
Source: ActionForex
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