July 20th chart of the week: ECB data dependency and the EURUSD technical outlook

The European Central Bank (ECB) is scheduled to hold its next monetary policy meeting this week on July 22–23, 2026, with the main policy decision and press conference taking place on Thursday, July 23.

(Please review the economic calendar for your local date and time)

Following the uptick in Eurozone inflation, which began in early March of 2026 as energy prices rose globally due to the war in Iran. The June 2026 reading showed inflation had dropped from 3.18% in May to 2.76% in June. However, as energy prices remain elevated, the impact on inflation remains a major concern and may keep the ECB’s policymakers and markets more data-dependent as the war continues.

On July 16th, Speaker Alvaro Santos Pereira, governing council member from Portugal, during an interview with the Portuguese newspaper Observador¹, said, “There is a very high degree of uncertainty and considerable volatility, with development sometimes changing almost daily in relation to the conflict in the Middle East. The most important thing right now is to look at the data and understand what is happening”.

Similar comments were also made a day earlier by Emmanuel Moulin, a member of the governing council from France, during an interview with France 5 television. The speaker said, “We are living in a very high volatility. This is why we need to be prepared for all eventualities”².

According to the ECB watch tool, 92.0% of participants expect the ECB to keep its deposit facility rate at 2.25% for the July 2026 meeting. However, the September 9th, 2026, meeting shows a 78.6% chance of a 25-basis-point rate hike³.

• As of early 2025, EUR/USD has been trading in an uptrend, rising from 1.0400 to 1.1800. Later in the year, price action broke below the uptrend and has been trading within a widening formation as marked by the blue lines on the above chart. As the Iran war began in early March 2026, EUR/USD dove back to the 1.1360 - 1.1400 range, where it has found support so far.
  
• As of early February 2026, an inverted complex head-and-shoulders pattern has emerged on the daily chart. The pattern has so far held above the lower border of the widening formation (lower blue line). The neckline is marked in red and intersects with the monthly R1 of 1.1616.
  
• The daily chart shows that as of June 19th, 2026, price action remained within the range of 1.1380 - 1.1470. Price action has attempted to break above the monthly PP at 1.1470 but has so far been unsuccessful.
  
• An intermediate confluence of support lies below the price action, represented by the intersection of the weekly PP at 1.1432 with the fast EMA9, SMA9, and the intermediate SMA21. The three moving averages are converging within a tight range of 1.1415-1.1432.
  
• The most recent upside move, highlighted in a light yellow rectangle on the chart, was preceded by a positive divergence between price action and the stochastics indicator, as marked by green lines. The upside move included shortfalls and bullish engulfing candles, adding to its momentum.
  
• Lagging indicators, stochastics, and RSI remain in line with price action, with the latter (RSI) lagging. Stochastics remains just below its overbought level with the %K (fast) at 57.9 and %D (slow) at 63.32, while RSI remains just below its neutral level at 46.65.
  
• Shorter time frames reflect a potential minor downward exhaustion gap at market open, within the range of 1.1438 - 1.1428. The price action following the gap has remained around the gap level so far.

Asset managers / institutional (green Line) are holding a net-long position. While it has drifted slightly lower from its all-time high, it remains structurally strong and supportive of the currency. Correspondingly, the dealer/Intermediary (red line) is holding a net-short position, which aligns with asset managers’ and other market participants’ positioning, as dealers take the other side of the market. The leveraged funds category (blue line) is currently at an intermediate short extreme, which goes back to 2021, suggesting a potential change in sentiment. The euro futures open interest remains structurally high at around 700,000 - 800,000 but has plateaued recently.

In conclusion, the upcoming ECB policy meeting is set against a backdrop of significant geopolitical uncertainty and elevated energy costs, keeping policymakers firmly in a data-dependent stance.

While institutional asset managers maintain structurally strong net-long positions in EUR/USD, the cautious positioning of leveraged funds suggests a more complex market sentiment. Ultimately, with the ECB remaining vigilant and the technical landscape showing mixed signals, traders should closely monitor upcoming economic data releases to gauge the next decisive move in market direction.

Footnotes

1https://observador.pt/programas/noticiario/as-noticias-das-6h-2435/

2https://www.econostream-media.com/news/2026-07-15/ecb%E2%80%99s_moulin:_inflation_impact_to_depend_on_persistence_duration_of_renewed_mideast_tensions.html

3https://ecb-watch.eu/