Demand Zone for Euro stable above 1.1000, Spain’s inflation falls below 2%

Posted Wednesday, July 12, 2023 by
Richard Adrian • 2 min read

The euro is getting stronger against the US dollar. The euro/dollar exchange rate is now at 1.1040, which is a new high. The US dollar is also getting weaker overall, with the US Dollar Index (DXY) down to 101.30. This is the lowest it has been in weeks.

The euro is getting stronger because investors are expecting inflation in the US to continue plummeting into July. This has heightened anticipation of the FED putting an end to the rate hikes. 

The US dollar is also getting weaker overall. This is due to a number of factors, including the ongoing war in Ukraine and the Federal Reserve’s interest rate hikes. A weaker US dollar makes the euro more attractive to investors.

The European Central Bank (ECB) is expected to raise interest rates in the coming months. This will make the euro more attractive to investors who are looking for higher yields. Overall, the euro is getting stronger against the US dollar and is expected to continue to do so in the near future.

According to U.S. fundamentals, the United States economy is also doing well despite a tight job market. Both of which are raising the chances of a 25 basis point rate hike from the Federal Reserve. If this happens, the European Central Bank (ECB) will take similar measures and increase its policy rate by 25 basis points in July. However, the ECB is still leaning towards a more hawkish stance. This is because inflation in the eurozone is still high and well above the ECB’s target.

Spain inflation rose 1.9% in the year to June and 0.6% month-on-month. The US will release mortgage applications and the Beige Book today, and Neel Kashkari, Raphael Bostic, and Loretta Mester will speak. All of which are fundamentals that will hugely influence the direction of EUR/USD.

According to technicals, If the uptrend continues, the euro/dollar exchange rate could reach the 2023 high of 1.1095, followed by the round level of 1.1100. Next, the weekly top of 1.1184 is in sight, which is supported by the 200-week simple moving average (SMA) at 1.1180. Finally, the euro/dollar could reach the round level of 1.1200.

If the euro/dollar exchange rate falls, it will likely find support at the 100-day simple moving average (SMA) at 1.0833. If the price breaks below this level, the next support level is the May low of 1.0635. This level is also supported by the 200-day SMA at 1.0636. If the price falls below this level, the next support level is the March low of 1.0516. Finally, the lowest level is the 2023 low of 1.0481.

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