Go short on EURUSD ahead of ECB interest rate decision

EURUSD spent the last week trapped in a narrow range between 1.13500 and 1.14500. Initially, it found temporary refuge when US inflation data came in cooler than expected. The print took some pressure off the dollar, dialing down monetary tightening bets. Nevertheless, it is too soon to celebrate—resilient retail sales and a solid labor market suggest that the American economy isn't heading for a cliff anytime soon. This gives the Federal Reserve (Fed) ample room to keep its hawkish rhetoric intact and delay interest rate cuts.

But that was then. Fast forward to the start of this week, and the greenback is firmly in the driver's seat. What's behind the shift? Rising US Treasury yields—with the 10-year sitting just above 4.60%—are now making dollar-denominated assets look really attractive. In the meantime, the euro is getting squeezed from the other side. More specifically, soaring oil and gas prices are a major headache for the energy-dependent eurozone, worsening its trade balance and reigniting inflation concerns—both of which are weighing on the single currency.

Looking ahead, all eyes are on the European Central Bank's (ECB) interest rate announcement, due July 23. A hold at 2.40% is almost a done deal for the markets, so the decision itself is unlikely to move the needle. Instead, the real fireworks will come from the accompanying statement and President Christine Lagarde's press conference. If the tone leans dovish, as expected, it could be the trigger that sends the pair tumbling.

The ultimate recommendation is to sell EURUSD at the current price (1.14000), aiming to reach 1.12500 within two weeks. To protect your position from adverse market movements, place a Stop Loss order at 1.15000.