Euro clings to the area above 1.0900 ahead of Powell.

Euro exchanges ups & downs in the low-1.0900s.Stocks markets in Europe trade in a mixed fashion on Wednesday.

The cautious trade prevails ahead of key testimony by Powell.The risk-off sentiment continues to weigh on the risk space.The greenback appears mildly bid so far midweek.

The Euro (EUR) still struggles to find a clear direction and leaves EUR/USD to the mercy of the inconclusive price action around the low-1.0900s on Wednesday. This lack of direction could be attributed to investors’ caution ahead of Chief Jerome Powell’s semiannual testimony before Congress later in the day.

Market participants anticipate a hawkish message from Powell during this key event. It’s worth noting that at the June FOMC event, rate-setters indicated a possibility of resuming the tightening campaign in July, with projections pointing towards two more 25 bps rate hikes or a 50 bps raise.

While Powell’s testimony takes centre stage on Wednesday, the markets are also closely monitoring the likely next decisions on interest rates by both the Federal Reserve and the European Central Bank (ECB) at their meetings next month.

There are no data releases scheduled in the Eurozone on Wednesday, but the usual weekly MBA Mortgage Applications and the API’s weekly report on US crude oil stockpiles are due across the Atlantic.

Daily digest market movers: Euro keeps the tight range near 1.0900

Pre-Powell cautiousness continues to favour the US Dollar against the Euro.

Powell’s testimony is expected to fall on the hawkish side.

Sticky UK inflation prompts extra tightening by the BoE in H2 2023.

China, recession concerns maintain the risk appetite subdued so far.

The FX universe continues to monitor the European Central Bank-Federal Reserve divergence.

ECB’s Board member Peter Kazimir argued that further tightening in September remains uncertain.

Technical Analysis: Euro still targets the 1.1000 hurdle near term

EUR/USD seems to have met some decent contention around the 1.0900 neighbourhood so far this week. In order to continue its upward momentum, the Euro must quickly surpass the monthly high at 1.0970 (June 16) to potentially allow for a test of the psychological barrier of 1.1000. Further resistance levels include the 2023 high of 1.1095 (April 26), the round level of 1.1100, and the weekly high of 1.1184 (March 31, 2022), which is supported by the 200-week SMA, currently at 1.1181.

In the event that the bears take control, there is an interim contention at the 55-day SMA at 1.0880. Should this level be breached, there are no significant support levels until the May low of 1.0635 (May 31), followed by the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).

ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.

The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.

The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

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