The Euro (EUR) is trading almost sideways, maintaining a position slightly above the 1.1400 level against the US Dollar (USD) on Tuesday. This movement places the pair mid-way through its current four-week horizontal trading range. While a slight reversal in the US Dollar Index has provided some underlying support, heightened tensions in the Gulf and a recent surge in oil prices are currently limiting any significant upward momentum for the Euro.
Increased hostilities between the US and Iran over the weekend have fueled fears of further escalation, dampening global risk appetite. Regional volatility is being exacerbated by reports of closures near the Strait of Hormuz and Houthi-led blockades against Saudi Arabian vessels in the Red Sea, both of which have heightened concerns regarding potential crude oil shortages.
Despite these tensions, risk aversion remains at moderate levels, bolstered by reports that mediators have presented Iranian authorities with a proposal for a 10-day ceasefire, offering a potential window for de-escalation.
In Europe, market attention is divided between the upcoming ZEW Economic Sentiment Survey and the pivotal European Central Bank (ECB) monetary policy meeting on Thursday. While the ECB is widely expected to maintain current interest rates, investors are looking for signals regarding a potential hike in September during President Christine Lagarde’s subsequent press conference.
The US economic schedule remains light for the remainder of the week, with the primary focus being the release of the preliminary S&P Global Manufacturing and Services Purchasing Managers’ Index (PMI) figures this Friday.
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- Australian Dollar Pulls Back from Monthly PeakThe AUD/USD pair traded lower near the 0.7010 mark on Tuesday, marking a retreat from its four-week high. Despite this decline, the Australian Dollar remains positioned above the key psychological threshold of 0.7000, supported by cooling United States economic data that has tempered demand for the US Dollar (USD).The US Dollar remains largely stable as market participants weigh rising geopolitical tensions in the Middle East against evidence of slowing US inflation. While geopolitical instability and elevated oil prices continue to drive safe-haven inflows, recent inflation metrics have lowered expectations for further aggressive interest rate hikes by the Federal Reserve. Consequently, the US Dollar Index (DXY) is hovering near 101.00, following its highest level since mid-July.Recent US Consumer Price Index (CPI) data showed a monthly decline of 0.4% in June, with the annual rate moderating to 3.5%. This downward trend in inflation was further supported by weaker producer-price data, which has helped the Australian Dollar maintain its strength despite the geopolitical support for the Greenback.The US labor market also showed signs of slowing. The ADP Employment Change four-week average dropped to 16.5K, down from the revised 19.25K, indicating a deceleration in private-sector hiring. This cooling in the labor market prevented a significant recovery for the US Dollar and allowed the AUD/USD to hold above the 0.7000 level.Market attention now shifts to Australia’s June employment data due this Thursday. Economists expect employment to grow by 15K, a significant slowdown from the previous 40.3K increase. The unemployment rate and participation rate are both forecasted to remain steady at 4.4% and 66.7%, respectively.Short-term technical analysis:On the 4-hour timeframe, AUD/USD is trading at 0.7007, maintaining a position above the 20-period Simple Moving Average (SMA) at 0.6998 and the 100-period SMA at 0.6946. This positioning suggests a mildly bullish near-term bias. Price action is currently supported by a horizontal floor at 0.7003, while the Relative Strength Index (RSI) sits near 57, indicating constructive momentum without being overbought as the pair consolidates below recent peaks.On the upside, immediate resistance is located at 0.7014, with a tighter barrier at 0.7019 where recent supply has been identified. On the downside, immediate support is found at 0.7003, followed by the 20-period SMA at 0.6998 and a secondary horizontal support at 0.6997. The 100-period SMA at 0.6946 remains well below, reinforcing the underlying bullish structure as long as current price levels hold.
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