July 21, 2022 18:01:40

The shared currency lost part of its two-day gains post ECB decision and political uncertainty in Italy. The currency reversed its early gains and trades below 1.0200. Despite the weakness in the US dollar, the asset is failed to sustain the gains.

The European central bank (ECB) raised the interest rates for the first time since 2011. The spike in the major is supported by the bigger-than-expected rate hike. It seemed the market already discounted the 50bps rate hike against the 25 bps. On top of that, the ECB chief failed to provide further detail on the new anti-fragmentation tool and interest rates.

In addition to that, the resignation of Italian Prime Minister Mario Draghi today weighed on the prospect of the shared currency. President Sergio Mattarella is likely to announce an early election for October.

The greenback rebounds from the early losses and reclaims the 107.0 mark as investors continue to digest the Fed’s hawkish plan against other major central banks.

As of press time, EUR/USD reads at $1.018, up 0.06% for the day.

EUR/USD turns sideways

On the daily chart, the EUR/USD pair has been trading in a long-term downside trend. The pair tested the lows of nearly 20 years. However, the formation of a ‘hammer’ candlestick resulted in more than a 300-pip rally.

But, the pair’s strong upside resistance is near 1.02800 as the multiple ‘Doji’ candlestick formations near the higher levels suggest indecision among traders.

What’s Next?

If the buyers managed to produce a daily candlestick above the session’s high then it could be a sign of bullish momentum. This also coincides with the 20-day EMA.

In that case, the first upside target could be found at the high of July 4 of 1.0448.

On the flip side, a shift in the bearish sentiment could see more downside in the pair. Vital support is placed near 1.0080.
The RSI (14) reads at 40 with a neutral bias.