EUR/USD Still Range-Bound as Europe Faces Another Energy Crisis
EUR/USD continued last week’s range-bound trading with investors now keen on the upcoming US inflation data. The EUR to USD exchange rate was trading at 1.022, which was slightly above the intraday low of 1.0130. Focus now shifts to the upcoming data and Europe’s energy crisis.
US inflation data
The higher-than-expected employment figures released on Friday strengthened the US dollar against the Euro and other major currencies. The numbers were interpreted as a sign that the Fed may continue with its aggressive rate hikes in an effort to deal with high inflation.
On Saturday, the central bank’s Governor Michelle Bowman asserted that the Fed should consider rate hikes of 75 basis points in its coming meetings. In a separate statement, Mary Daly, another Fed official said that the bank should consider a 0.50% rate hike in September.
While the dollar index pulled back in Monday’s session, EUR/USD has its gains curbed by expectations of a hawkish Fed. With regards to the US CPI, economists expect the annual inflation to have eased to 8.7% in July compared to the prior month’s 9.1%. This view is based on the fact that the price of gasoline dipped to about $4 in July.
Excluding the volatile components of food and energy, the forecast 6.1% exceeds June’s reading of 5.9% YoY.
Meanwhile, the euro also reacted to the latest warning by Norway. In a statement, the country’s energy minister warned that the country could lower its electricity exports in the coming months. He cited the lower water levels at the country’s hydropower plants. Norway sells electricity to countries like France and Germany.
EUR/USD technical analysis
As has been the case for about three weeks now, EUR/USD is still trading within a horizontal channel. While it edged higher on Monday, it remained below the 25 and 50-day exponential moving averages as at the time of writing.
On the one hand, I expect it to hold steady above the critical zone of 1.0100 in the ensuing sessions. Even so, 1.0304 will likely remain a steady resistance zone for the currency pair.
From this perspective, the range between 1.0148 and 1.0240 will be worth watching in the short term. Notably, a move below 1.0094 will invalidate this thesis.