The European Central Bank joined the rate hiking party and raised interest rates by 50bp, instead of 25bp. The euro reacted to the rate hike with an initial jump toward 1.0278 but gains were capped at that level. It is not surprising that the euro’s upward potential was limited with euro-zone break-up risks rising. Italy’s Prime Minister Mario Draghi resigned, throwing the country into turmoil and putting it on course of snap elections as early as October. The ballot may take place on October 2.
Political chaos in Italy adds to the litany of problems for the European Union, which is already grappling with the consequences of the war in Ukraine, the energy crisis and the threat of a recession.
Given all the eurozone troubles we remain bearish on the euro. Below 1.0080, we expect more losses to come. Above 1.0280, the euro may test the 1.0350-resistance.
Have a good weekend.
Our EUR/USD trading ideas for 22/7/22:
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Long @ 1.0235
Short @ 1.0165
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