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- L & # 39; EUR / USD invalidated the double-bottom break on Friday.
- The market is expecting the Fed to cut rates by 50 basis points this year.
- The ECB observes negative rates until the second quarter of 2023.
The bullish case concerning the EUR / USD is weakened before the decision of the Federal Open Market Committee (FOMC) on rates, which is due on Wednesday.
The currency pair closed well below 1.1263 on Friday, reversing the break-up of the double bottom – a bullish reversal pattern – confirmed on June 6th.
The US dollar rallied after US retail sales improved the estimates, removing the need for an immediate rate cut in July. As a result, the EUR / USD should remain under pressure today and support at 1.1199 (61.8% Fib retracement of 1.1107 / 1.1348) could come into play.
Although the likelihood of a Federal Reserve (Fed) rate cut in July may have decreased, the market is still expecting the central bank to lower its rates by at least 50 points. this year.
Nevertheless, a significant weakness in the US dollar seems unlikely, as Euribor rates indicate that the European Central Bank (ECB) will keep interest rates in negative territory until the second quarter of 2023, according to Reuters.
In simple terms, the long-term rate differential favors the strength of the US dollar and the path of least resistance for EUR / USD is on the decline. The short-term outlook, however, would become bullish if the Fed increased bets on the rate cut this week, pushing the pair above the recent peak of 1.1388.
Pivot levels
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