Title: EUR/USD Holds Uptrend Despite Retreat from Recent Highs, Trades Near 1.1615
Author: VT Markets – Live Forex Market Updates
Original article published at: [VT Markets](https://www.vtmarkets.com/live-updates/despite-retreating-from-recent-highs-eur-usd-maintains-a-positive-stance-trading-around-1-1615/)
As trading sessions progressed through early July, the euro remained buoyant against the US dollar, despite experiencing a modest pullback from its recent multi-week highs. The EUR/USD pair has demonstrated resilience and continues to hover around the 1.1615 level. The pair’s performance suggests the underlying bullish sentiment remains intact even amid short-term profit-taking.
This article explores the factors influencing the EUR/USD pair, analyzing recent price action, economic indicators, central bank policy statements, and broader macroeconomic influences. It also delves into potential avenues for the EUR/USD in the short- to medium-term.
Recent Performance of the EUR/USD Pair
The EUR/USD currency pair has experienced fluctuations during recent sessions, but underlying momentum has remained largely bullish. The euro saw an impressive rally earlier this month, testing levels above 1.1650 before encountering resistance, prompting a pullback.
Despite the current phase of consolidation, the pair remains notably stronger compared to its positions in recent months. That strength can be attributed to various economic and geopolitical factors which have recently strengthened the euro while pressuring the US dollar.
Key Drivers for the Euro’s Recent Performance
Several elements have contributed to the euro’s recent gains against the greenback. These include positive eurozone data, diminishing expectations of further rate hikes by the Federal Reserve, and diverging central bank outlooks between the European Central Bank (ECB) and the Federal Reserve (Fed).
• Eurozone Inflation Trends:
– Recent inflation figures from the eurozone have shown gradual improvement and slowed from previous highs.
– Core inflation remains above the ECB’s target, reinforcing expectations of a cautious monetary stance from the central bank.
– Strong German CPI and Spanish inflation readings provided further support, reinforcing the euro’s outlook.
• Hawkish ECB Stance:
– The European Central Bank has hinted at maintaining higher interest rates for an extended time to combat persistent inflation.
– ECB President Christine Lagarde, in her most recent speech, emphasized the necessity of being data-driven and signaled no imminent rate cuts.
– Strong employment and wage growth across eurozone economies support a tighter monetary policy environment.
• Weakening US Dollar:
– The strength of the euro also derives in part from the dollar’s recent underperformance.
– Weaker-than-expected US economic data, including softer labor market indicators, have shifted Fed expectations.
– A clear pullback in Treasury yields has reduced demand for the dollar.
US Dollar Faces Downward Pressure
The US dollar, on the other hand, has faced several headwinds dragging it lower and supporting EUR/USD upside momentum.
• Mixed US Economic Data:
– Non-farm payroll figures surpassed expectations, but wage growth and labor participation did not show consistent strength.
– The ISM services index came in lower than forecast, leading to increased speculation of a slowdown in US economic growth.
– Recent jobless claims also rose slightly, adding to the cautious sentiment.
• Fed Interest Rate Path Uncertainty:
– Federal Reserve Chairman Jerome Powell emphasized the importance of incoming data to set rate policy.
– Recent Federal Open Market Committee (FOMC) minutes revealed growing concerns about inflation persistence but emphasized restraint due to weakening consumer demand.
– Traders have reassessed the likelihood of additional rate hikes in the near term, boosting risk sentiment and weighing on the dollar.
• Decline in Treasury Yields:
– Ten-year and two-year US Treasury yields have retreated from recent highs, reflecting diminished inflation fears.
– Lower yields reduce the attractiveness of the dollar in global capital flows, aiding the euro in the process.
Read more on EUR/USD trading.