Traders speculating on EUR/USD are in a wait-and-see mood ahead of crucial events. The key macroeconomic data has been already digested. So, the market is anticipating the policy meetings of the Federal Reserve and the ECB scheduled for the next week.
EUR/USD opened a new trading week quietly without price gyrations. In the Asian session, the currency pair declined to 1.1200. Then, the bulls again entered the market and pushed the instrument to 1.1250.
Such price fluctuations were driven by the data on China's GDP in the second quarter of this year. The mixed data did not help either the bulls or the bears of EUR/USD. On the one hand, China's GDP rose by 6.3% year-on-year in the second quarter after a 4.5% growth in the first quarter. On the other hand, most experts expected a more significant increase in the indicator, by 7.3%. Such optimistic forecasts rested on the low base effect, since in April-June last year, strict economic restrictions were imposed in a number of large cities in China. And yet, the de facto Chinese economy has shown a positive trend. Therefore, today's GDP report did not boost the anti-risk sentiment.
Judging by the dynamics of the current market, the EUR/USD pair fell into a drift, gaining a foothold at the levels slightly above 1.1200. EUR/USD is expected to get stuck in a wide-range flat within the borders of 1.1150 - 1.1250. EUR/USD traders are ready for the lull before the storm. The high-profile events of the past week (key inflation reports, the ECB minutes) have been already absorbed. The no less high-profile events of the next week (the July meetings of the Fed and the ECB) are yet to come. In anticipation of such significant events, traders are unlikely to open large bets on EUR/USD. Regulators can either reinforce the uptrend or destroy it provided that the Federal Reserve supports the greenback, and the European Central Bank "sinks" the single currency. Therefore, in my opinion, EUR/USD traders will act more cautiously this week, given such polar opposite outcomes of the meetings.
Obviously, each more or less significant report will be viewed through the prism of the upcoming meetings of the Fed and the ECB. This week's economic calendar is not full of macroeconomic events, but not completely empty either.
For example, on Tuesday, July 18, US retail trade data will be released. According to preliminary estimates, the report will reflect a positive trend. The total volume should increase by 0.5% in June (after growth by 0.3% in May). Excluding car sales, retail sales are expected to expand by 0.4% (after growth by 0.1%). Data on industrial production in the US will be published also on Tuesday. In May, this indicator was in the negative area (-0.2%), reflecting negative trends. In June, it should go to zero.
On Wednesday, July 19, we will find out the final data on inflation growth in the eurozone for June. According to forecasts, the final data will coincide with the preliminary estimate. In this case, the release will not have any impact on the trading instrument. During the American session on Wednesday, US building permits for June will be available. The number of building permits is expected to drop to -2.3% after a growth by 5.2%.
On Thursday, July 20, the most important reports will be published in the US. In particular, the market will get to know a weekly update on US initial applications for unemployment benefits. Economists project an increase in the indicator, albeit "within the normal range" (+242K). But the Philadelphia Fed manufacturing index should again be in the negative area, where it has been got stuck since September 2022. According to forecasts, the index will come out at -10.2 points in July. In addition, on Wednesday existing home sales for June will influence market sentiment. This report is unlikely to be on the side of the greenback. According to the median forecast, the indicator will again stay below zero (-1.2%) after an uptick of 0.2% in the previous month.
On Friday, the economic calendar for the EUR/USD pair is actually empty. So, at the end of the trading week, traders will trade rather "by inertia", unless there are force majeure events which will increase anti-risk sentiment in the markets.
Thus, mainly macroeconomic reports of a secondary importance are planned for this week. Therefore, they will have a local impact on EUR/USD on condition the readings significantly differ from the forecasts. The crucial data on the labor market and inflation have already been published earlier, both in the US and Europe. The upcoming economic data is likely to complement the already established fundamental picture of the instrument. In any case, they will not be able to "redraw" it radically.
At the moment, EUR/USD buyers are trying to overcome the resistance level of 1.1250, plotted by the upper line of the Bollinger Bands indicator on the daily chart, in order to open their way to the next obstacle at 1.1300. From the point of view of technical analysts, long positions remain a priority on all larger timeframes. The instrument is now either on the upper or between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator, including Kumo clouds. From my point, it makes sense to consider long positions only during downward corrective pullbacks with the target of 1.1250. The closer the pair gets to the borders of 1.1300, the higher the risk of a downward sharp move. Therefore, at the current highs, long positions look risky, despite a very favorable fundamental background.