EUR/USD Bulls Facing Challenges: Can They Surpass 1.1200 and 2022 Peak

The EUR/USD pair reached a 2023 high at 1.1275 on July 18 but faced significant selling pressure as the Euro (EUR) weakened against the US Dollar (USD). The bulls need to overcome the resistance at 1.1200 and clear the rejection level at 1.1275 to have a chance of revisiting the 2022 price peak of 1.1495, which was tested earlier this year on February 10th.

The recent price action reflects an overall risk-off market environment, with the USD showing strength as indicated by the DXY (Dollar Index) rising above 100 to reach 100.30, a multi-week high. This rise in the dollar’s value is likely driven by sliding U.S. bonds and low German bond yields, making the dollar a safe haven for investors and institutions.

In the near future, traders anticipate the Federal Reserve to raise interest rates by 25 basis points (bps) in July, which may have an impact on the pair. Meanwhile, the European Central Bank’s (ECB) rate hike in July is uncertain, as officials from the bank have been less hawkish in their recent statements, reducing the likelihood of an increase.

Inflation data in the Eurozone has been elevated, with a recorded 5.5% year-on-year (yOy) rate and core inflation also at 5.5% in July. These high inflation figures may add further complexity to the market dynamics.

Now, let’s analyze the technical indicators:

• RSI (Relative Strength Index): The RSI currently stands at 68, indicating a neutral market sentiment. It suggests that neither the bulls nor the bears have a clear dominance at the moment.
• MACD (Moving Average Convergence Divergence): The MACD reading is 0.00946, signaling a buy signal. This suggests that there may be potential upward momentum in the pair.
• Hull Moving Average: The Hull Moving Average is located at 1.12735, close to the yearly high. This level could act as strong resistance, and a decisive break above it would indicate further bullish strength.

Overall, the technical analysis shows that the EUR/USD pair is currently facing selling pressure and remains below the critical 1.1200 level. However, there are potential bullish signals from the MACD indicator. The key levels to watch are the 1.1200 resistance and the 1.12735 level, which coincides with the yearly high. 

Traders should closely monitor market developments, especially regarding central bank rate decisions and inflation data, as they may have a significant impact on the pair’s direction in the coming days.

EUR/USD pair chart analysis