The EUR/USD pair started the week positively, although it is having difficulty consolidating above the parity level.
The euro gained some traction thanks to the European Central Bank’s members leaning toward a larger interest hike in their next September meeting. On the other hand, the U.S. dollar, measured by the DXY, is retreating from a fresh cycle high of 109.47 reached during the European session.
At the time of writing, the EUR/USD pair is trading at the 0.9990-1.0000 zone, 0.35% above its opening price, after bottoming at a five-day low of 0.9914 earlier in the session.
Following last week’s hawkish minutes from the ECB, the Governing Council members are delivering a more aggressive line for the next monetary policy decision. In the context of the Jackson Hole Symposium, Isabel Schnabel, Martins Kazaks, and Francois Villeroy de Galhau all argued for forceful significant policy action as they assessed the high cost of inflation in the EU.
Kazaks affirmed that he is open to discussing 50 and 75 basis point hikes as possible moves. Villeroy argued that the neutral rate should be reached before the end of this year after a “big step” in September, while Schnabel focused on the fact that inflation expectations are too high, threatening to undermine the confidence in the ECB and that its officials need to make a forceful action to prove determination.
WIRP suggests that a 50 bps hike is fully priced in for the September meeting and that market participants are betting on a 60% probability of a 75 bps move.
From a technical perspective, the EUR/USD pair holds a short-term bearish outlook, according to indicators on the daily chart. The RSI has a positive slope well below its midline, while the MACD prints lower red bars, indicating decreasing selling interest.
On the upside, the following resistance levels are seen at the 1.0100 area, followed by the 20-day SMA currently at 1.0125 and then the 1.0150 zone. On the downside, the bulls need to secure the parity level to gather momentum. If lost, the 0.9955 zone and the cycle low of 0.9900 could be retested.
