Euro Holds Steady After Monday’s Drop as Markets Await Inflation Data

The Euro (EUR) is holding its ground around the 1.15 level after falling 1.3% against the US Dollar (USD) on Monday. According to Scotiabank strategists Shaun Osborne and Eric Theoret, the currency is trying to stabilize after the sharp decline.

Interest Rate Differentials Support the Euro

Despite recent volatility, underlying fundamentals remain positive for the Euro. A gradual rise in the Germany–US 2-year bond yield spread continues to support the currency. However, market sentiment has clearly played a major role in the Euro’s decline. Analysts point to risk reversal trends that show growing demand for protection against further Euro strength.

Bullish Positioning and Inflation Data in Focus

The latest CFTC report shows that long positions on the Euro remain high, with net holdings at $18.4 billion—near the upper end of historical levels. This extended bullish positioning leaves the EUR vulnerable to market corrections.

Looking ahead, traders will be watching for Friday’s July preliminary inflation data (CPI). While not typically a market-moving release, the European Central Bank’s (ECB) recent expectations put one-year inflation at 2.6% and three-year expectations at 2.4%.

EUR/USD Outlook: Range-Bound in the Short Term

On the technical side, EUR/USD appears to be forming a base near its 50-day moving average at 1.1570. The overall trend remains bullish, supported by a pattern of higher lows and higher highs since February. However, the Relative Strength Index (RSI) has dipped slightly below 50, indicating weaker momentum.

For now, the Euro is expected to trade within a narrow range, with support at 1.1520 and resistance near 1.1680.

Make money without lifting your fingers: Start using a world-class auto trading solution.

EightCap, your trusted Partner in CFDs, Cryptocurrencies and Stocks.