The EUR/USD pair was testing its low around 1.0940, which could significantly affect the technical prospects of the trading instrument. We will discuss it in more detail below. European politicians are getting more and more unanimous about the fact that the European Central Bank will soon decide to end its interest rate hike program.
It is evident that discussions on this topic serve as preparatory groundwork for the decision itself. More and more ECB representatives are stating that the central bank's actions are timely, while their effects are lagging, and that it is necessary to stop "tightening belts" as interest rate hikes could seriously affect inflation, slowing it down considerably in the near future.
According to ECB Governing Council member Yannis Stournaras, the ECB is close to completing its rate hike cycle and is likely to end it this year. "We are close to the end. However, we have not yet achieved our goals, so I agree with Madame Lagarde that we still have some distance to go," said the Governor of the Bank of Greece in an interview.
His comments came just a week after the ECB, led by Christine Lagarde, slowed the pace of its unprecedented rate hikes following a slight slowdown in core inflation in the eurozone in April this year. "We cannot yet say how many more rate hikes there will be," Stournaras said, noting that this will depend on inflation forecasts, economic growth, and financial conditions. "Considering today's circumstances and if nothing changes drastically, we can say that the rate hikes will cease in 2023."
Similar statements were also made by Governing Council member Joachim Nagel. He also believes that the ECB may be approaching the final stage of its historic interest rate hike cycle. Although borrowing costs have not yet ended, and core inflation still needs to be controlled, the head of the Bundesbank stated that he is very pleased with the ECB's monetary policy. "We are on the home stretch in the sense that we are reaching levels of monetary policy that are considered restrictive."
As I noted earlier, Nagel's statements are in line with the opinion of most economists who believe that the ECB will raise the deposit rate twice more, in June and July this year, leaving it at a peak of 3.75%.
Nagel supported last week's decision to slow the pace of tightening, while announcing the end of reinvestment in the asset purchase program as the right thing to do, although he stressed that the work is not over yet.
As for the technical picture of EURUSD, the bulls have less chances for growth. To do so, they need to stay above 1.0940 and take control of 1.0970 along with 1.1000. This will allow them to break out of the 1.1030 range. From this level, they can climb to 1.1060, but doing so without solid US data will be quite problematic. In case the trading instrument declines only around 1.0940, I expect big buyers to be active. If there is no one there, it would be good to wait for an update of the 1.0910 low or open long positions from 1.0870.
As for the technical picture of GBPUSD, the bulls continue to control the market. To push for its growth, they need to take 1.2630. A breakthrough of this level will strengthen the hope for further recovery in the 1.2665 area, after which it will be possible to talk about a more significant jump to the 1.2710 area. In case the pair falls, the bears will try to take control over 1.2600. If they succeed, the breakout of this range will hit the bulls' positions and push GBPUSD to a low of 1.2560 with the prospect of reaching 1.2520.