Title: EURUSD price resumes upside towards 1.0300, focus shifts to ECB

Jul 20, 2022 01:27 AM ET

By: AnalysisWatch

The EURUSD is trading near the 1.0250 level after regaining ground around the 1.0220 level at the beginning of the Asian session. The pair continues to benefit from the ECB's restrictive expectations and the ongoing correction of the US dollar across the board.

The currency pair was caught in a fresh wave of selling in early European trading on Tuesday, rising over 100 points to a two-week high of 1.0270, but the bulls failed to sustain the higher price as it closed the day below the psychological barrier of 1.0250.

The US dollar extended its corrective decline from two-decade highs for the fifth consecutive day on Wednesday. Pushing back against tightening expectations from the Reserve Bank of Australia (RBA) and the ECB weighed on the dollar. In addition, diminishing fears of a 100 basis point rate hike by the Fed in July and easing recession risks have calmed markets somewhat, leading many investors to believe that the bottom may have been reached. The positive market sentiment is also affecting the dollar's downward trend against its major peers.

According to a report by Reuters news agency on Tuesday, ECB policymakers will discuss a 50 basis point rate hike at their meeting. A double rate hike to combat record-high inflation will thus come as no surprise. Money markets anticipate a 40% chance of a half-point rate hike this week and a 97 basis point tightening by September, up from a one-point increase previously assumed. The news from the ECB has given the EUR/USD short market a much needed tailwind.