Price Analysis

EUR/USD Price Prediction as Inflation Hits 10.2% In Spain

Briefly

  • EUR/USD fails to rebound from seven-year lows.
  • ECB to hike interest rates in July.
  • Rates differential favors the United States dollar.

June’s final trading week remains crucial for Forex traders. First and foremost, the trading month concludes on Thursday, so volatility will likely surge over the main fixing times. Secondly, June’s Non-Farm Payrolls (NFP) data won’t appear on Friday as expected.

That’s because of the 4 July national holiday in the U.S. The trading week will end with slow actions, with market players focusing on other things besides trading.

Therefore, investors will use this week to interpret economic stats and try to predict the upcoming movements within the market. Moreover, the euro remains on the radar due to the ECB meeting at Sintra, Portugal. What should we expect from EUR/USD?

Meanwhile, inflation hit 10.2% in Spain early today, and the core data noted nearly half of the upswing. Thus, the ECB remains under pressure in July, and the bank will potentially resort to a 50 basis point rate increase instead of the 25bp one.

That’s while most market players forecast upswings in EUR/USD from here. For instance, ING predicts surges for the pair.

ING is among the leading banks in Europe. It projects the EUR-USD exchange rate exploring 1.08 by 2022 end and 1.15 come 2023. That exceeds the market optimism, with consensus seeing EUR-USD at 1.07 come 2022-end and 1.11 in 2023’s final sessions.

However, the pair’s price action reveals a different narrative. EUR/USD could not rebound from seven-year lows. It should do that soon to avoid breaking horizontal support.

EUR at 7-Year Lows Against USD

EUR-USD hovered around its 7-year support level. The euro plunged to 1.05 against the U.S dollar from 1.40 with no impressive bounce since Mario Draghi began to cut interest rates.

Meanwhile, a lot has happened on both Atlantic sides within the last seven years. Trump became the U.S President, then Macron won the France presidential seat, and the ECB maintained a dovish bias.

Fast forwards to current times, Europe battles the effects of war and pandemics. Again, ECB maintains a dovish bias. Meanwhile, even with a 50bp hike from ECB in July, interest rate divergences with the U.S Fed will keep soaring.

Therefore, the EUR/USD road with fewer hurdles remains toward parity and not market consensus.

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