US Dollar Price Forecast: ECB Decision Looms – Can GBP/USD and EUR/USD Break Out?

US Dollar News: ECB Decision Takes Centre Stage

Attention has shifted to the ECB’s July 23 decision as the US economy is weighed against the backdrop of upcoming Federal Reserve deliberations in the week leading to that event. The consensus among market observers suggests that the ECB will maintain its deposit rate at 2.25 per cent, although market participants are keen to hear from Lagarde if slowing inflation combined with slower growth might allow for another rate cut later this year. Business lending has still been sluggish in the eurozone despite a modest revival in credit demand, the most recent ECB lending survey revealed.

In the meantime, the dollar has been buoyed by robust economic data. June retail sales inched up 0.2 per cent in June on month, compared to a 0.5 per cent jump in the control group that excludes automobiles, fuel and building materials. This was in tandem with initial jobless claims dropping to 208,000 last week, the lowest in three months. There has not been much chatter that the Fed will raise rates next week, but Fed policymakers will be careful to maintain a balanced outlook, particularly with inflation concerns still lingering and the domestic economy remaining resilient. Markets are also anticipating this week’s S&P Global flash PMI, which will be one of the last surveys of manufacturing and services ahead of next week’s Fed decision.

Meanwhile, the pound will continue to revolve around the Bank of England’s future moves, with markets pricing in Bank Rate staying at 3.75 per cent next time around. With UK inflation running above the BoE’s 2 per cent target and wages continuing to grow more quickly than prices, the UK central bank might be less likely to signal the onset of rate cuts soon. The UK government’s fiscal plans and new labour market data will also be of interest to the investment community throughout the second half of the year.

Dollar Index (DXY) Technical Analysis: Buyers Defend Trendline as 101.65 Remains Key Breakout Level

The Dollar Index remains anchored to its uptrend and the 100.50 support area, preserving the bullish picture despite modest losses today. Trading near 101.01, the DXY is comfortably above its 50-EMA (100.38) and 100-EMA (99.80), with bullish control remaining intact higher on the timeframe.

The first level of resistance to watch is 101.65, with the next major ones coming in at 102.30 and 103.02. Initial support is provided by 100.50, with the rising trendline and 99.53 providing further support further back. RSI sits in the mid-50 area around 55, showing that momentum remains mostly neutral to slightly bullish despite being cooled from its earlier peak, thus the opportunity for yet another upside leg remains on the table.

If 100.50 holds, the bias would still be positive for renewed buying in an effort to test 101.65. Should the pair trade above the aforementioned levels in a daily close, the scenario would strengthen for another push towards 102.30, but the trendline and 100.50 could break, causing that bullish perspective to be pushed off and instead testing the 99.53.

GBP/USD Technical Analysis: Recovery Faces Strong Resistance Near 1.3400

GBP/USD is still struggling, having broken below its rising channel, and is still below the 1.3390 to 1.3400 area. It is trading around 1.3376, below both of its EMAs (50-EMA: 1.3405; 100-EMA: 1.3409) with a negative short-term outlook. RSI is just above 40, suggesting that the downtrend is easing but not reversing yet.

The first level of resistance is at 1.3400, followed by 1.3422 and 1.3449. Support starts at 1.3323, with 1.3274 and 1.3218 as further downside areas.

Unless the pair is able to reclaim 1.3400 and trade above both EMAs, any upside moves would likely be sold. The current resistance rejection could send the GBP/USD to 1.3323, but if a breakout above the 1.3400 resistance was to occur, it would likely open up another rally toward 1.3449.

EUR/USD Technical Analysis: Triangle Support Holds as Bulls Target 1.1446

EUR/USD is picking up from the triangle’s uptrend in the 2-hour time frame, where buyers are still holding higher lows. It is trading around 1.1426 just above both the 50 and 100 EMAs; RSI has recovered back towards 58, demonstrating improved bullish momentum.

The first line of resistance is 1.1446, with 1.1481 and 1.1528 as the next major ones. Initial support is at 1.1399, while 1.1362 and 1.1325 would support any decline.

Any breakout above 1.1446 would confirm that a bullish breakout has occurred from the formation and would likely see prices rally to 1.1481, but if the pair is to be rejected from this level, the 1.1399 support could then come in play and the pair’s support would revert to the triangle’s bottom.