Should We Keep an Eye on the Euro's Upside Potential Against the U.S. Dollar?

Should We Keep an Eye on the Euro's Upside Potential Against the U.S. Dollar?

31.07.2023

Last weekend, the U.S. dollar fell against the pound after the final reading of the University of Michigan’s July Consumer Sentiment Index, released on the 28th, was revised downward from the previous reading of 72.6 to 71.6, falling short of market expectations of 72.6.GBP/USD rose by approximately 120 pips from 1.2762 to 1.2886.This prevented the pair from hitting a new low for the month. However, on the daily chart, GBP/USD remains below the 20-day moving average, and with the RSI trending downward, we should remain cautious about a downward trend until the pair makes new highs and lows, in accordance with Dow Theory.

Despite the fact that Germany’s July Consumer Price Index (CPI), released last weekend, fell to 6.2% year-over-year from 6.4% the previous month, the euro rose against the U.S. dollar. The EUR/USD pair rose by approximately 100 pips, from 1.0943 to 1.1046.The downtrend below the 20-period moving average (MA) on the hourly chart has paused, and the pair has rebounded back above the 20-MA. On the higher-time-frame weekly chart, the pair has pulled back after encountering resistance at the 200-period simple moving average (SMA), so we will be watching closely to see if this pullback continues this week.

Today, at 3:00 p.m., German retail sales and the German import price index, as well as South Africa’s money supply; at 3:30 p.m., Swiss retail sales; at 5:30 p.m., UK consumer credit balances; and at 6:00 p.m., the Eurozone’sQ2 real GDP, and the Eurozone Consumer Price Index at 5:30 p.m.; South Africa’s trade balance and Mexico’s Q2 real GDP at 9:00 p.m.; the U.S. Chicago Purchasing Managers’ Index at 10:45 p.m.; and the U.S. Dallas Fed Manufacturing Activity Index at 11:30 p.m.We will be watching for upside potential in the euro, which has risen against the U.S. dollar.