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EUR/USD holds steady above 1.09 after ECB & Fed decisions. Oil holds above 70.00 on China's optimism.
 

EUR/USD holds steady above 1.09 after ECB & Fed decisions

• ECB hiked rates to a 22-year high
• EZ inflation, US Michigan confidence data due
• EUR/USD consolidates around 1.0950, eyeing 1.10

EUR/USD booked its largest one-day rally since February yesterday, rising to a peak of 1.0950 after the ECB raised interest rates as expected and after Fed Chair Powell’s hawkish tone earlier in the week failed to have a lasting impact.

As expected, the ECB raised interest rates by 25 bps to its highest level since 2001. The central bank also signaled that it would raise interest rates again in July as the fight against inflation is far from over.

The decision came as the bank raised its inflation forecasts and trimmed its growth outlook for the next three years. ECB President Christine Lagarde struck a hawkish tone, warning again that inflation was too high for too long.

Meanwhile, the USD fell against its major peers in the previous session after higher-than-expected jobless claims, a sign that the labor market could be weakening, raised questions over whether the Fed would need to hike rates twice more this year.

 Today the euro is struggling to extend the run-up. Attention now turns towards eurozone inflation data, which is expected to confirm the preliminary reading of 6.1% YoY, down from 7%.

US Michigan consumer confidence data will also be in focus and is set to improve slightly to 60 from 59.2. Fed officials James Bullard and Jonathan Waller are also due to speak and could shed more light on the Fed’s outlook for interest rates.
 

EUR/USD outlook – technical analysis

EUR/USD extended the rally from the May low of 1.0635, rising above the 20, 50 & 100 sma. The price is hovering around 1.0950, which is acting as immediate resistance. A consolidation around here could leave the door open for further gains towards 1.10. Above here, the rising trendline resistance at 1.1050 comes into play.

Conversely, support can be seen at 1.09 round number and 1.08885 the 50 sma. It would take a move below 1.08 the 100 sma to negate the near-term bullish trend.

(Click on image to enlarge)

Oil holds above 70.00 on China's optimism

• China refinery throughput jumped 15.4% YoY
• China rate cut optimism offsets hawkish Fed bets
• Oil tests 20 sma resistance

WTI crude oil is holding steady after rising 3.5% in the previous session and is on track to gain across the week after two straight weeks of losses.

Oil surged higher yesterday after data showed that refinery throughput in China jumped 15.4% in May YoY, its second-highest level on record.

The data and a series of interest rate cuts in China this week have helped to calm concerns over the stalling post-pandemic recovery in China, the world’s largest oil importer. Just this week, both retail sales and industrial output data disappointed.

Attention will now turn to the loan prime rate next week to see whether the Chinese authorities will inlock further stimulus.

Meanwhile, the rebound in optimism surrounding China is being offset by concerns over a more hawkish than expected Federal Reserve and higher rates in Europe. The Fed paused interest rate hikes but signaled that it could raise interest rates twice more this year.

Rising interest rates raise the prospect of a recession in the US, which could hurt the oil demand outlook.

Looking ahead, US consumer confidence data and several Fed speakers could shed more light on the future path for interest rates.

Baker Hughes rig count data is also due.
 

Oil outlook – technical analysis

Oil has been forming a series of lower lows but has found support at 67.00 on several occasions. The price has rebounded off the low at 67.00 and has run into resistance around 70.80 the 20 sma. Buyers need to rise above here to bring 73.35, the June 8^th high, into focus and the 50 sma, ahead of 75.00, the June high, to create a higher high.

Should sellers successfully defend the 20 sma, a break below 67.00 would create a lower low, extending the bearish trend towards 63.60, the May low.

(Click on image to enlarge)

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