EUR/USD hovers around 1.0200, upside looks likely as DXY weakens, Eurozone GDP eyed

• EUR/USD is expected to deliver more gains after overstepping the immediate hurdle of 1.0220.
• Fed’s mild hawkish guidance and concerns for softening retail demand have dragged the DXY.
• A vulnerable Eurozone GDP figure may weaken the shared currency bulls.

The EUR/USD pair is spinning around the critical figure of 1.0200 after picking offers around 1.0220 in the late New York Session. The pair has turned sideways after a sheer upside and is likely to extend its gains if the asset oversteps Wednesday’s high at 1.0220.

Well, it’s not the fundamentals of shared currency which has driven the asset higher but the plummeting US dollar index (DXY), which is responsible for the upside auction. The DXY witnessed a steep fall after the Federal Reserve (Fed) escalated its interest rates to 2.25-2.50%.

The option of a 1% rate hike was not viable as retail demand has been softer last month and an extreme policy tightening measure could dampen the catalyst further.

As per the commentary from Fed chair Jerome Powell, the labor market is rock solid and the Fed is seeing interest rates near 3.5% by the end of CY2022. Therefore, room for more rate hikes is less and the market participants may see normalcy in interest rate hikes in September monetary policy meeting.

On the eurozone front, fears of an energy crisis have escalated after the commentary from the German gas regulator that energy prices could accelerate further dramatically. The gas supply cut off from the main pipeline from Russia has created havoc in eurozone as the Winter season is coming, which is known for higher gas demand.

This week, the eurozone will report the Gross Domestic Product (GDP) data on Friday, which will provide further guidance to investors. The economic data is seen lower at 3.4% than the prior release of 5.4% on an annual basis. A vulnerable GDP figure may weaken the shared currency bulls.