- The euro gets relief despite the Italian political crisis.
- The dollar corrects downwards from maximums in years.
- EUR/USD remains above parity, avoiding further downward pressure for the time being.
EUR/USD is rising on Friday ahead of major US data releases. The pair traded above parity all day and recently hit a two-day high at 1.0059. It remains near the maximum, trying to consolidate above 1.0050.
The EUR/USD recovery comes after falling to 0.9950 on Thursday, the lowest level since 2002. If the gains are extended, resistance can be seen at 1.0075, followed by 1.0125. In the opposite direction, below 1.0030 the euro could lose very short-term momentum, to challenge 1.0000 again. Below parity bearish pressures would re-emerge.
dollar correct
The greenback is giving back a part of the recent gains in the market, before a rise in the stock markets and a modest recovery in raw materials. DXY is down 0.25%, trading at 108.35. Treasury bond yields are stable ahead of the US economic data release.
June retail sales report (consensus: +0.9%), June industrial production (+0.1%) and July preliminary University of Michigan consumer confidence index (49.9) will be released. In the latter, inflationary expectations will also be looked at. Inflation data showed no slowdown, boosting the chances of a 100 basis point hike by the next Fed meeting and giving support to the dollar.
Next week it will be the turn of the European Central Bank and it is discounted that the first interest rate rise in years will take place, with a first step of 25 basic points. Subsequent increases would be 50 basis points.
In addition to the war and problems over energy prices and supplies, another issue emerged in Europe: the political crisis in Italy. Mario Draghi resigned as Prime Minister, after losing the support of Five Stars. President Mattarella rejected the resignation, giving Draghi until Wednesday to get support from parliament. If not, there would be early elections.
The political crisis in Italy led to an increase in the difference between Italian and German bond yields, which reached a maximum in one month.
Technical levels
Source: Fx Street
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