EURUSD may change direction in anticipation of U.S. data

Dollar’s volatility is down amid low trading activity due to the US holiday. Traders await the release of the June minutes of the U.S. Federal Reserve meeting to get a clearer picture on plans to raise interest rates.

U.S. manufacturing slumped in June to the lowest level since May 2020. However, price pressures are easing as supply improves and rising borrowing costs have weakened demand.

Global policymakers are still concerned about high inflation, even though it's been more than a year since interest rates rose precipitously.

According to the CME Fedwatch tool, investors estimate a nearly 90% chance of a 25 basis point Fed rate hike in July. As a result, rates will be in the 5.25–5.50% range through early 2024.

The European Central Bank is also likely to raise rates by 25 basis points this month. Earlier, European Bank Chief Christine Lagarde said that the regulator will consider another key rate hike at the next meeting to bring inflation down to the target level of 2%.

However, the ECB's report at the forum in Sintra indicates the possibility of a change in the approach to consumer prices in the Eurozone. Bank officials estimate the current inflation figures acceptable amid the need for a green transition and increased energy independence.

This week the market participants are waiting not only for the FOMC meeting minutes publication, but also for Friday's data on the US labor sector. The number of new non-farm payrolls is projected to fall to 225K from the previous value of 339K. These forecasts could depreciate the value of the US dollar by the end of the week.

The EURUSD currency pair is forming a downward correction on the H1 timeframe.

The RSI (standard values) shows a divergence, which gives a leading indicator for the possibility of trend change. It is expected that the price is going to break through a downward resistance and form a bullish corridor.

Signal:

The short-term outlook for the EURUSD pair is to buy. 

The target is at the level of 1.0975.

Part of the profit should be fixed at the level of 1.0940.

A Stop-loss should be placed at the level of 1.0850.

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.