- Euro slips back to the 1.0930 region amidst tepid dollar’s recovery.
- Stocks markets in Europe kick in the week with small retracements.
- ECB speak will take centre stage later the session.
- US markets are closed due to the Juneteenth holiday.
- Fed-ECB divergence remains in the centre of the debate.
- US NAHB index will be the sole release across the ocean.
The European currency (EUR) starts the new trading week on a frail note and retest the low-1.0900s on the back of some recovery in the US Dollar.
Indeed, EUR/USD comes under some mild downside pressure on Monday and gives away part of last week’s gains to the 1.0970 region, or multi-week highs, pari passu with investor’ adjustment to the recent hawkish messages from both the European Central Bank (ECB) and the Federal Reserve.
On the latter, it is worth mentioning that the ECB Christine Lagarde, as well as many of her colleagues at the Governing Council, already advocated for an extra quarter-point rate raise in July, while Chief Jerome Powell also left the door open to a similar move at the July 26 gathering. This scenario is favoured with nearly 75% of probability according to CME Group’s FedWatch Tool.
Changing the subject and looking at the latest CFTC positioning report, speculative net longs in the EUR dropped for the fifth consecutive week in the week ended on June 13 to around 151.8K contracts, as investors increased their prudence ahead of the key ECB meeting on June 15.
In the domestic data space, ECB P. Lane, A. Enria and L. De Guindos will be in the centre of the debate later in the session, while the housing market will be in the limelight in the US calendar following the release of the NAHB Housing Market Index for the month of June.
Daily digest market movers: Euro appears offered amidst scarce volatility
- The US Dollar rebounds from last week’s lows in the 102.00 zone.
- Markets’ focus will likely be on the US Secretary of State A. Blinken’s visit to China.
- Fed’s J. Powell’s testimonies will be the salient events later in the week.
- The ECB-Fed policy divergence remains the almost exclusive driver of the pair’s price action for the time being
Technical Analysis: Interim contention emerges around 1.0880
The Euro (EUR) has retreated slightly from its new monthly high of 1.0970 reached on June 16. To make further gains, it needs to overcome this level quickly, which would allow it to potentially reach the psychological barrier of 1.1000. If it continues to climb, the next major resistance levels are the 2023 high of 1.1095 (April 26), followed by the round level of 1.1100, and then the weekly top of 1.1184 (March 31, 2022). The latter is supported by the 200-week SMA, which currently stands at 1.1181.
If the bears take control, there is a temporary support at the 55-day SMA at 1.0881. If this level is breached, there are no significant levels of support until the May low of 1.0635 (May 31) prior to the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).