Go short on EURUSD as ECB and Fed meetings take center stage

The past week has been anything but kind to EURUSD. A toxic mix of escalating Middle East tensions, surging oil prices, and a resilient American labor market has kept the pair firmly on the back foot. Rising energy costs have revived fears of an inflation comeback in the United States, while a drop in jobless claims has underscored the economy's staying power. As a result, Treasury yields are now moving higher, and markets are pricing in a more aggressive Federal Reserve (Fed) stance.

The European Central Bank's (ECB) July 23 meeting did little to turn the tide. Interest rates stood at 2.40%, with policymakers admitting that the energy shock's full inflationary impact has yet to play out. This left the door open for further monetary tightening. However, markets were unimpressed. Without a clear commitment to a September hike, the single currency stumbled. And here's the real problem: for the eurozone, expensive oil and gas represent a double-edged sword, as they fan inflationary flames while simultaneously choking consumer demand and industrial activity. That's why even a potential rise may not be enough to prop up the euro in the long run.

Shifting our focus to the other side of the Atlantic, this week, all eyes are on the Fed's July 29 meeting. A rate hold is widely anticipated, though the odds of a hike remain uncomfortably high for euro bulls. A hawkish surprise or a nod toward a move in the fall could breathe new life into the dollar, sending the pair toward 1.12500.

The ultimate recommendation is to sell EURUSD at the current price (1.14000), aiming to reach 1.12500 within one week. To shield yourself from any unexpected downside, place a Stop Loss order at 1.14500.