EUR/USD remains firm near 1.0900 with focus on ECB policy meeting

• EUR/USD consolidates near 1.0900 as investors shift focus to the US monthly Retail Sales and the ECB policy meeting.
• The ECB is expected to leave interest rates unchanged.
• Monthly US Retail Sales are estimated to have remained unchanged in June.

EUR/USD hovers in a tight range near the round-level figure of 1.0900 in Tuesday’s European session as the upside move stalls with a focus on Thursday’s European Central Bank (ECB) monetary policy meeting. The major currency pair is broadly firm as investors expect the ECB will not deliver subsequent rate cuts. 

The ECB is expected to leave its key rates unchanged as policymakers worry that an aggressive policy-easing approach could uplift price pressures again. In the last monetary policy meeting, the ECB forecasted the price pressures to remain at their current levels for the entire year. 

As the ECB is expected to keep interest rates at their current levels, investors will focus on cues about when the central bank will cut interest rates again. Currently, financial markets expect that the ECB will cut interest rates two times more this year. The ECB is expected to deliver rate cuts in the September and December meetings. 

On the economic data front, a sharp decline in the German ZEW Survey – Economic Sentiment for July has raised concerns over the economic outlook. The sentiment data, a key measure of the sentiment of institutional investors towards economic growth, falls at a faster pace to 41.8 from the estimates of 42.5 and the former release of 47.5. On the contrary, the other component, known as the Current Situation, surprisingly improves to -68.9. Economists expected the sentiment data to have worsened further to -74.3 and the prior release of -73.8

Daily digest market movers: EUR/USD consolidates as USD Index holds the 104.00 support

• EUR/USD struggles to extend its upside above more than the three-month high of 1.0920. The upside move in the shared currency pair appears to have stalled for the time being as the US Dollar (USD) gains ground after Federal Reserve (Fed) Chair Jerome Powell’s speech at the Economic Club of Washington on Monday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, manages to protect its immediate support of 104.00.
• In his speech on Monday, Powell acknowledged that the inflation data in the second quarter has added to confidence that inflation will return sustainably to the bank’s target of 2%. However, Powell cited the need of more good data to gain greater confidence before cutting interest rates.
• According to the CME FedWatch tool, 30-day Federal Fund futures pricing data shows that the central bank will cut interest rates twice this year and will start reducing them from the September meeting.
• Recent Consumer Price Index (CPI) data for June showed that headline and core inflation decelerated at a faster pace than expected on a monthly and annual basis. The monthly headline CPI deflated for the first time in more than four years. 
• In Tuesday’s session, the major trigger for the US Dollar will be the United States (US) Retail Sales data for June, which will be published at 12:30 GMT. The Retail Sales data, a key measure of consumer spending that drives consumer inflation, is estimated to have remained unchanged month-on-month after barely growing in May.

Technical Analysis: EUR/USD sees more upside above 1.0920

EUR/USD tests the breakout region of the Symmetrical Triangle formation on a daily timeframe near 1.0880. A breakout of the above-mentioned chart pattern results in wider ticks and heavy volume. The near-term outlook of the major currency pair is bullish as the 20-day Exponential Moving Average (EMA) near 1.0816 is sloping higher. 

The 14-day Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, suggesting a strong upside momentum.