The EUR/USD consolidates near 1.1400 late on Wednesday, up a modest 0.08%, as it consolidates, with the shared currency failing to capitalise on overall US Dollar weakness across the board.
EUR/USD steadies as Middle East escalation limits Dollar downside
The escalation of the US-Iran war might boost the Greenback in the near-term. US President Donald Trump warned Iran that any ship attacked would trigger retaliation, which includes bombing a bridge or power plants near Iran’s capital.
The US continued its attacks for the twelfth consecutive day. Meanwhile, the UK Maritime Trade Operations (UKMTO) reported an attack to a tanker within the Red Sea. Recently, Yemen’s Houthis announced that they attacked two Saudi oil tankers.
This pushed Oil prices higher, as West Texas Intermediate (WTI) rose nearly 8% to $88 per barrel, increasing the chances that the Federal Reserve could tighten monetary policy sooner rather than later.
Money markets had priced in a 63% that the US central bank will keep rates unchanged at the July 29 meeting. This leaves a 37% chance of a rate hike, up from 23% a day ago, according to Prime Terminal data.
On Thursday, the European Central Bank (ECB) will release its latest monetary policy decision, in which the central bank is expected to hold the ECB FRate On Deposit Facility unchanged at 2.25%. After the decision, eyes would be on the press conference led by ECB President Christine Lagarde.
Across the pond, the US economic schedule will be light, with the release of Initial Jobless Claims for the week ending July 18, which are expected to rise from 208K to 212K.
EUR/USD Price Forecast: Technical outlook
In the daily chart, EUR/USD trades at 1.1408, keeping a bearish near-term bias as spot holds beneath the latest triple simple moving average at 1.1510 and within a downward parallel channel. The pair is trading just over the channel floor at 1.1396, while the prior downtrend resistance line’s break level at 1.1574 and the channel top at 1.1570 remain well overhead, suggesting rallies are likely to be capped. The Relative Strength Index (14) at 43.38 stays below the neutral 50 mark, hinting at weak but not oversold downside momentum in line with the prevailing structure.
On the topside, initial resistance is seen at the clustered area formed by the triple simple moving average around 1.1510, followed by the channel’s upper boundary near 1.1570 and the former trend-line break point at 1.1574, ahead of a stronger horizontal barrier at 1.1849. On the downside, immediate support sits at the bottom of the descending channel near 1.1396; a sustained break below this level would open the way for an extension of the current bearish phase toward lower psychological levels.
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