EUR/USD Bears Eye Sub-$1.12 on US Soft-Landing Bets

Highlights

• The EUR/USD had a bearish start to the Wednesday session.
• It is a busier day on the European economic calendar, with Eurozone inflation numbers for June in focus.
• However, these are finalized inflation numbers, leaving investors to respond to revisions to prelim numbers.

It is a relatively busy day ahead for the EUR/USD. Finalized Eurozone inflation numbers for June will draw investor interest this afternoon.

ECB President Christine Lagarde and Executive Board Members have remained committed to taming inflation. However, forward guidance has shifted to data dependence beyond the summer break.

While sticky July inflation numbers should raise the bets of more rate hikes after the break, ECB members have refrained from committing to moves beyond July. However, upward revisions could pressure the ECB hawks to deliver more assertive forward guidance.

According to prelim figures, the Eurozone inflation rate softened from 6.1% to 5.5% in June. However, core inflation, the ECB focal point, accelerated from 5.3% to 5.4%.

Earlier this week, ECB Executive Board Members Joachim Nagel and Bostjan Vasle talked about sticky inflation but remained uncommitted to a September move.

The US Session

It is a relatively busy day on the US economic calendar, with the US housing sector in the spotlight. Prelim building permits and housing start numbers for June will draw interest.

An uptrend in permits and starts would signal optimism among home builders and strong home buyer demand. Upbeat numbers would support the theory of a soft landing despite the disappointing US retail sales and industrial production numbers. The housing sector is a litmus test of the US economy.

EUR/USD Price Action

Daily Chart

The Daily Chart showed the EUR/USD found support at the $1.12 psychological resistance level and the upper level of the $1.1180 – $1.1221 resistance band. Avoiding sub-$1.12 gives the bulls a look at $1.13. However, the EUR/USD would need to break down resistance at $1.1250 to target $1.13.

Looking at the EMAs, the EUR/USD sat above the 50-day ($1.09456) and 200-day ($1.07600) EMAs, signaling bullish momentum over the near and longer term.

Notably, the 50-day EMA pulled further away from the 200-day EMA and reflected bullish momentum.

Looking at the 14-Daily RSI, the 73.72 reading signaled the EUR/USD in overbought territory. However, the EMAs support a EUR/USD hold above the $1.1221 – $1.1180 resistance band and signal a breakout from $1.1250 to target $1.1300.

4-Hourly Chart

Looking at the 4-Hourly Chart, the EUR/USD sits above the $1.12 psychological level and the $1.1180 – $1.1221 resistance band.

The EUR/USD remains above the 50-day ($1.11309) and 200-day ($1.09683) EMAs, sending bullish near and longer-term signals.

Significantly, the 50-day EMA pulled further away from the 200-day EMA, signaling a run at $1.13.

The EUR/USD must avoid sub-$1.1200 to support a sustained breakout from the $1.1180 – $1.1221 resistance band to target $1.13. However, a fall to sub-$1.1200 would bring the 50-day EMA ($1.11309) into view.

The 14-4H RSI at 62.34 sends bullish EUR/USD price signals. Significantly, the RSI aligns with the 50-day EMA, supporting a run at $1.13.