Last week, the dollar index posted its worst week of 2023 amid news of declining US inflation, which was seen as a motive for easing the Fed’s current tight monetary policy. “I think the dollar can stay under selling pressure,” Carol Kong, currency strategist at Commonwealth Bank of Australia, told Reuters.
On the other hand, inflation in the Eurozone is not declining as fast. FT writes that some ECB officials consider it necessary to raise the rate several more times after the summer meetings, which supports the euro.
The EUR/USD chart shows demand dominance. At the same time, the price of the euro against the dollar:
- rose above the 1.1200 level for the first time in 17 months. Note that this level has influenced the EUR/USD price dynamics in the past;
- went beyond the upper limit of the ascending channel.
Given these 2 observations, we can assume that the market is in a vulnerable position for a pullback, and the bulls will need to make specific efforts to gain a foothold above 1.1200.
The situation may change in the near future:
- US retail sales data to be released today at 15:30 GMT+3;
- Tomorrow at 12:00 GMT+3 inflation data in the Eurozone will be published.
