• EUR/USD maintained its upside bias above 1.0800.
• There was no activity in the US due to the Independence Day holiday.
• Investors’ now look at Friday’s US Payrolls.

The US Dollar (USD) experienced another bearish performance, motivating the USD Index (DXY) to revisit the vicinity of the 105.00 region amidst the dominating appetite for risk-related assets and marginal trading conditions due to the US Independence Day holiday.

The downturn in the Greenback kept the upward pressure intact on EUR/USD, pushing it back above the key 1.0800 yardstick. The pressure on the Greenback intensified following discouraging results from the US economic calendar in the previous session, particularly concerning the labour market, which revived expectations of Federal Reserve (Fed) interest rate cuts as early as September.

Closer to home, the ECB published its Accounts of its June 6 meeting, where it trimmed rates by 25 bps, as widely anticipated. In the Accounts, policymakers showed concern about inflation after cutting interest rates last month, fearing further delay could be costly and complicate future efforts to anchor inflation expectations. The bank’s officials also noted that the final phase of disinflation, known as “the last mile,” is the most challenging.

Meanwhile, the macroeconomic landscape remained relatively stable on both sides of the Atlantic. The ECB is contemplating further rate reductions beyond the summer, with market expectations leaning towards two additional cuts by year-end. Conversely, speculation among market participants surrounds whether the Fed will implement one or two rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

Based on the CME Group’s FedWatch Tool, there is approximately a 73% likelihood of interest rate cuts in September, contrasting with nearly a 95% probability by the December meeting.

The recent ECB rate cut, coupled with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks. This discrepancy could potentially lead to further weakening of EUR/USD in the short term. Nonetheless, prospects of economic recovery in the Eurozone, alongside perceived weaknesses in US economic fundamentals, may mitigate this disparity, offering occasional support to the currency pair in the near future.

Looking forward, the next pivotal event for the currency pair will be the release of the highly influential Nonfarm Payrolls report for June on Friday, preceding the second round of French snap elections scheduled for July 7. Regarding the elections, Le Pen’s NR party is anticipated to capture between 210 and 250 seats out of the 289 seats required for a majority in the National Assembly.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further higher may see EUR/USD revisit the July peak of 1.0816 (July 3), followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this region, it might put the March peak of 1.0981 (March 8) back on the radar, ahead of the weekly high of 1.0998 (January 11) and the psychological 1.1000 mark.

If bears regain the upper hand, spot may fall to its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and ultimately the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, extra gains appear on the cards on a sustainable surpass of the key 200-day SMA (1.0794).

So far, the 4-hour chart shows the continuation of the bullish impulse. The initial resistance level is 1.0816, followed by 1.0852. The nearest support is at 1.0666, ahead of 1.0649 and finally 1.0601. The Relative Strength Index (RSI) climbed to about 69

EUR/USD Current price: 1.0797

• United States markets will remain closed amid the celebration of the Independence Day.
• Downbeat Germany Factory Orders limit the bullish potential of the Euro.
• EUR/USD battles around 1.0800, needs to overcome the weekly high at 1.0816.

The EUR/USD pair holds on to recent gains, trading around the 1.0800 mark mid-Thursday. Investors kept selling the US Dollar throughout the European session, although at a slower pace as time went by amid renewed hopes of an upcoming interest rate cut in the United States (US). The Federal Reserve (Fed) quick-started the year anticipating three potential 25 basis point (bps) rate cuts this year, but as inflation picked up in the first quarter, policymakers backed up.

Chairman Jerome Powell became increasingly hawkish, and the odds for rate cuts diluted, down to the point that market participants believed the central bank would go for just one rate cut in 2024. However, things seem to be taking a turn. Financial markets took Fed’s Powell latest words with more optimism and are now hoping a rate cut will come in September. As a result, the USD turned lower.

Data-wise, Germany published May Factory Orders, which fell 1.6% MoM, much worse than anticipated and limiting the Euro’s bullish scope. The upcoming American session is meant to be a quiet one, as US markets will remain closed amid the Independence Day holiday.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it battles around converging 100 and 200 Simple Moving Averages (SMAs), while the 20 SMA maintains its bearish slope far below the current level. Technical indicators, in the meantime, head north within positive levels, although with limited momentum as EUR/USD trades below the weekly high at 1.816. Once the pair clears this area, the chances of a firmer rally should increase.

In the near term, and according to the 4-hour chart, the upward strength has eased, but the overall picture is bullish. EUR/USD trades above a flat 200 SMA, which provides near-term support at around 1.0785. The 20 SMA eased, but keeps heading higher below the current level, after surpassing a directionless 100 SMA. Finally, technical indicators offer uneven slopes near overbought readings, without suggesting an upcoming slide.

Support levels: 1.0740 1.0700 1.0665

Resistance levels: 1.0815 1.0850 1.0880

EUR/USD Current price: 1.0797

• United States markets will remain closed amid the celebration of the Independence Day.
• Downbeat Germany Factory Orders limit the bullish potential of the Euro.
• EUR/USD battles around 1.0800, needs to overcome the weekly high at 1.0816.

The EUR/USD pair holds on to recent gains, trading around the 1.0800 mark mid-Thursday. Investors kept selling the US Dollar throughout the European session, although at a slower pace as time went by amid renewed hopes of an upcoming interest rate cut in the United States (US). The Federal Reserve (Fed) quick-started the year anticipating three potential 25 basis point (bps) rate cuts this year, but as inflation picked up in the first quarter, policymakers backed up.

Chairman Jerome Powell became increasingly hawkish, and the odds for rate cuts diluted, down to the point that market participants believed the central bank would go for just one rate cut in 2024. However, things seem to be taking a turn. Financial markets took Fed’s Powell latest words with more optimism and are now hoping a rate cut will come in September. As a result, the USD turned lower.

Data-wise, Germany published May Factory Orders, which fell 1.6% MoM, much worse than anticipated and limiting the Euro’s bullish scope. The upcoming American session is meant to be a quiet one, as US markets will remain closed amid the Independence Day holiday.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it battles around converging 100 and 200 Simple Moving Averages (SMAs), while the 20 SMA maintains its bearish slope far below the current level. Technical indicators, in the meantime, head north within positive levels, although with limited momentum as EUR/USD trades below the weekly high at 1.816. Once the pair clears this area, the chances of a firmer rally should increase.

In the near term, and according to the 4-hour chart, the upward strength has eased, but the overall picture is bullish. EUR/USD trades above a flat 200 SMA, which provides near-term support at around 1.0785. The 20 SMA eased, but keeps heading higher below the current level, after surpassing a directionless 100 SMA. Finally, technical indicators offer uneven slopes near overbought readings, without suggesting an upcoming slide.

Support levels: 1.0740 1.0700 1.0665

Resistance levels: 1.0815 1.0850 1.0880

• The dollar weakened after a weekly survey showed an increase in the number of US jobless claims, but selling interest had already peaked after the ISM services survey showed an unexpectedly sharp slowdown in activity.
• As a result, the GBP/USD jumped towards the 1.2777 resistance level, its highest in over two weeks, before settling around 1.2740 in early trading on Thursday, amidst a US holiday and anticipation of the UK parliamentary elections.

According to the results of the economic calendar, the US ISM main services purchasing managers index reached a reading of 48.8% in June, which indicates a contraction in activity, down from 53.8% in May. The decline compared to expectations was significant, as the consensus was ready to read 52.5%. In general, services companies constitute by far the largest sector in the US economy. Markets are reacting to the size of the loss and betting that the Federal Reserve will feel confident enough to cut US interest rates in September. In response, US bond yields have fallen, the dollar has fallen, and stocks have risen.

The ISM report showed that US companies expecting higher new orders fell to 47.3%, the lowest level since the Great Recession and lower than the 2001 recession. The price index was 56.3% in June, down 1.8 percentage points from the May reading of 58.1%. Commenting on this, analysts at ING Bank said, “This certainly strengthens the case for a September Fed rate cut as it ticks all the boxes of weak growth, slowing inflation and a deteriorating labor market. The Fed does not want to cause a recession if it can be avoided.”

Yesterday, the Labor Department reported that the number of Americans filing new claims for unemployment benefits rose by 4,000 last week to 238,000, seasonally adjusted. The consensus forecast was for a more modest level of 235,000. For his part, Fed Chairman Jerome Powell said on Tuesday that there is a possibility of cutting interest rates if the labor market deteriorates. This was a signal that the Fed would be open to cutting interest rates before inflation moderates to its 2.0% target.

This means that the burden is on the labor market to deliver the rate cuts that many households, businesses and investors in the US are hoping for.

For the dollar, the increased likelihood of a rate cut is leading to weakness. Continued jobless claims stood at 1.858 million in the week ended June 22, the highest level since late 2021. Commenting on this, Jos Verschoor of PNC Bank said, “The labor market is still strong, but hiring is slowing down.” And “the message from continued claims is clearer. They have risen above their levels in the second half of 2022 and the whole of 2023. Although the labor market is historically strong, unemployed workers are taking somewhat longer to find jobs.”

On Tuesday, Fed Chairman Powell said in Sintra, Portugal, that if the labor market is “unexpectedly weak… we will respond to that as well.”

Consequently, markets took this as a signal that labor market developments will take on additional importance for policymakers from now until September. The non-farm payrolls report on Friday will determine whether the dollar will end the week on a stronger footing or whether more selling is in store for it in July.

Technical forecasts for the GBP/USD pair today:

As we mentioned before, the success of GBP/USD in holding above the 1.2775 resistance will support the bulls in further upside. The next stop for further bull control will be 1.2830, which will increase talk of a return to the 1.3000 psychological resistance zone again. Obviously, this will require weaker US jobs numbers and a return of confidence in the pound from the results of the British parliamentary elections. On the other hand, and over the same time frame, the daily chart will remain the most important support level at 1.2600, as bears will control the trend.

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• The euro against the dollar (EUR/USD) found an opportunity to move higher following investor reaction to the minutes of the latest Federal Reserve meeting.
• It extended gains to reach the 1.0816 resistance level, the highest in three weeks, before settling around 1.0785 at the start of trading on Thursday.
• For its part, the US Federal Reserve left the target range for federal funds unchanged at 5.25%-5.50% for the seventh straight meeting in June 2024, in line with expectations.

US policymakers do not expect it to be appropriate to lower interest rates before they gain more confidence that inflation is moving sustainably towards 2%. Meanwhile, the dot chart showed that policymakers see only one rate cut this year and four cuts in 2025. In March, the Fed was looking at three cuts in 2024 and three in 2025.

On the stock trading platforms, the Stoxx 50 index of European shares rose 1 percent and the Stoxx 600 index rose 0.6 percent, recovering from the previous session’s losses, as investor sentiment improved amid expectations that the Federal Reserve will cut US interest rates this year. Yesterday, Fed Chairman Powell said at the European Central Bank Forum that prices are now showing signs of resuming their disinflationary trend and that much progress has been made on inflation. However, in Europe, European Central Bank President Lagarde tempered expectations of further rate cuts in Europe, saying the central bank needs more time to assess inflation and economic trends.

Indeed, preliminary estimates for June showed that services inflation remained high, and the core rate failed to slow, while headline inflation eased. Meanwhile, eurozone producer prices fell slightly more than expected in May and final PMIs confirmed a slowdown in both services and private sector activity.

On the corporate front, Deutsche Bank (-3.3%), Société Générale (-2.7%), BNP Paribas (-2.6%) and Airbus (-2.4%) were the best performers.

On the economic data memo front, eurozone producer prices fell by 0.2% on a monthly basis in May 2024, after a 1% decline in April and compared to expectations of a 0.1% decline. The reading represents the seventh straight month of producer price contraction, although the smallest in the series, driven by a 1.1% decline in energy costs (vs -3.6% in April) and a 0.1% decline in durable goods (vs 0.2%). Moreover, Intermediate goods prices (0.1% vs 0.3%), capital goods (0.1% vs 0.2%) and non-durable goods (0.1% vs 0.2%) also rose.

On an annual basis, producer prices fell by 4.2%, below the 5.7% decline and compared to expectations of -4.1%. Excluding energy, the producer price index rose by 0.1%, below 0.3% in April and fell by 0.4% on an annual basis (vs -0.9%).

Elsewhere, the eurozone composite PMI was revised slightly higher. The euro area HCOB composite PMI was revised slightly down to 50.9 in June 2024 from a preliminary reading of 50.8, compared to 52.2 in May. The reading points to continued growth in the private sector, although expansion slowed to a three-month low. Services slowed (52.8 vs. 53.2) while manufacturing contracted at a faster pace (45.8 vs. 47.3). Furthermore, the uptick in activity levels was capped by softer demand, with new orders falling for the first time since February. Weaker sales performance was particularly marked in non-domestic markets, including intra-euro area trade. Meanwhile, job creation was the weakest in five months, and there was also an easing in price pressures, with the rates of increase in input costs and output prices falling to their lowest levels in five and eight months, respectively. Finally, the outlook for services production next year was upbeat, although the overall level of positivity towards the outlook fell to its lowest since early 2024.

 EUR/USD Technical analysis and forecast:

EUR/USD traded inside a descending triangle before rising to suggest that a rally as high as the chart pattern is imminent. The price has pulled back to the previous resistance level, which now appears to be holding as support. The Fibonacci extension tool shows the next upside targets, with the pair already testing the 38.2% extension at the 1.0750 minor psychological mark.

Technically, the stronger upside momentum could take it to the 50% level at 1.0762 or the 61.8% Fibonacci level which aligns with the swing high at 1.0775. Furthermore, the 76.4% level is at 1.0790 and then the full extension at 1.0815. Overall, the 100 SMA has just crossed above the 200 SMA to confirm that the upside is likely to gain strength rather than retreat. Also, the moving averages are aligned with the broken triangle top to add strength as support. However, the Stochastic indicator is heading lower from the overbought zone to indicate exhaustion among buyers and a possible return of selling pressure. Likewise, the oscillator has plenty of room to slide before reflecting exhaustion among sellers. On the other hand, the RSI still has room to rise before reaching the overbought zone to indicate exhaustion among buyers, so the rally could continue.

Later this week, the US Non-Farm Payrolls report is due to be released and is set to show weak employment for June. If this is the case, the US dollar could weaken further as traders renew calls for more Fed easing. Ultimately, weakness in fundamental data such as Labor force participation and average hourly earnings could also weigh on the US dollar.

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• GBP/USD fluctuates in a tight range at around 1.2750.
• British voters head to polls for general election.
• The pair could struggle to find direction with US markets remaining closed on Independence Day.

GBP/USD advanced toward 1.2800 and reached its highest level since June 13 on Wednesday. With the market action turning subdued on Thursday, the pair entered a consolidation phase at around 1.2750.

The renewed selling pressure surrounding the US Dollar (USD) fuelled a leg higher in GBP/USD as markets reacted to dismal macroeconomic data releases.

The ADP’s monthly publication showed that payrolls in private sector increased 150,000 in June, missing the market expectation of 160,000, and the Department of Labor announced that there were 238,000 first-time applications for unemployment benefits in the week ending June 29, up from 233,000 in the previous week.

Additionally, the ISM Services PMI came in at 48.8 in June, down from 53.8 in May and pointing to a contraction in the service sector’s business activity. Details of the survey showed that the Employment Index and the Prices Paid Index dropped to 46.1 and 56.3, respectively.

The US economic calendar will not feature any macroeconomic data releases on Thursday, stock and bond markets will remain closed in observance of the Independence Day holiday. 

Meanwhile, British voters will cast ballots in a snap general election called by Prime Minister Rishi Sunak. Opinion polls suggest that there is a very strong likelihood the main opposition Labor Party will win a landslide, with Sir Keir Starmer becoming the next Prime Minister of the UK. Exit polls are expected to be announced shortly after voting ends at 22:00 local time (21:00 GMT). The final outcome is likely to be confirmed in the early morning hours on Friday.

On Friday, the US Bureau of Labor Statistics will release labor market data for June. Ahead of this key data release, investors could refrain from taking large positions, especially with the ongoing UK election and the US holiday.

GBP/USD Technical Analysis

GBP/USD currently trades near 1.2750 (static level). Once that level is confirmed as support, 1.2800 (psychological level, static level) could be seen as next resistance before 1.2860 (Jun 12 high).

On the downside, the 20-day Simple Moving Average aligns as support at 1.2700 before 1.2670 (50-day SMA) and 1.2650 (100-day SMA).

• GBP/USD fluctuates in a tight range at around 1.2750.
• British voters head to polls for general election.
• The pair could struggle to find direction with US markets remaining closed on Independence Day.

GBP/USD advanced toward 1.2800 and reached its highest level since June 13 on Wednesday. With the market action turning subdued on Thursday, the pair entered a consolidation phase at around 1.2750.

The renewed selling pressure surrounding the US Dollar (USD) fuelled a leg higher in GBP/USD as markets reacted to dismal macroeconomic data releases.

The ADP’s monthly publication showed that payrolls in private sector increased 150,000 in June, missing the market expectation of 160,000, and the Department of Labor announced that there were 238,000 first-time applications for unemployment benefits in the week ending June 29, up from 233,000 in the previous week.

Additionally, the ISM Services PMI came in at 48.8 in June, down from 53.8 in May and pointing to a contraction in the service sector’s business activity. Details of the survey showed that the Employment Index and the Prices Paid Index dropped to 46.1 and 56.3, respectively.

The US economic calendar will not feature any macroeconomic data releases on Thursday, stock and bond markets will remain closed in observance of the Independence Day holiday. 

Meanwhile, British voters will cast ballots in a snap general election called by Prime Minister Rishi Sunak. Opinion polls suggest that there is a very strong likelihood the main opposition Labor Party will win a landslide, with Sir Keir Starmer becoming the next Prime Minister of the UK. Exit polls are expected to be announced shortly after voting ends at 22:00 local time (21:00 GMT). The final outcome is likely to be confirmed in the early morning hours on Friday.

On Friday, the US Bureau of Labor Statistics will release labor market data for June. Ahead of this key data release, investors could refrain from taking large positions, especially with the ongoing UK election and the US holiday.

GBP/USD Technical Analysis

GBP/USD currently trades near 1.2750 (static level). Once that level is confirmed as support, 1.2800 (psychological level, static level) could be seen as next resistance before 1.2860 (Jun 12 high).

On the downside, the 20-day Simple Moving Average aligns as support at 1.2700 before 1.2670 (50-day SMA) and 1.2650 (100-day SMA).

• Private employers in the US hired fewer workers than expected in June.

• There was an unexpected increase in unemployment claims from 234,000 to 238,000.

• The UK service sector declined by a smaller margin than expected.

The GBP/USD forecast points north, with the dollar frail after several downbeat economic reports in the previous session. Meanwhile, the pound strengthened on better-than-expected PMI data.

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The dollar had a tough time in the previous session as reports showed a slowdown in the economy that could push the Fed to start lowering borrowing costs. The US released data, which included private employment, service sector business activity, and unemployment claims. 

Private employers in the US hired fewer workers than expected in June. The ADP employment change occurred at 150,000, dropping from the previous 157,000. Meanwhile, economists had expected an increase of 163,000 jobs. 

Other employment figures revealed an unexpected increase in unemployment claims from 234,000 to 238,000 in the previous week. These reports indicated a decline in demand in the labor market, which has remained resilient for most of this year. If this trend continues with Friday’s nonfarm payrolls, the Fed will be pressured to cut interest rates. 

Furthermore, the services sector went from expansion to contraction in June as business activity declined. The ISM Purchasing Managers Index fell from 53.8 to 48.8, indicating a sharp slowdown. 

On the other hand, although UK service sector activity also declined, it was by a smaller margin than expected. The S&P Global’s services PMI fell from 52.9 to 52.1. Economists had expected the index to drop to 51.2. Investors will now wait for the UK parliamentary election results.

GBP/USD key events today

• UK parliamentary elections

GBP/USD technical forecast: Bulls take charge after consolidation

On the technical side, the GBP/USD price is in a bullish rally after breaking out of a period of consolidation. Previously, the price traded in a large range with support at 1.2700 and resistance at 1.2850. However, bears gathered enough momentum to break below the support level. 

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Unfortunately, the downtrend barely lasted because the price started ranging again. At the same time, the RSI made a bullish divergence, showing bears barely had the strength to continue lower. At this point, bulls took control and broke above the 1.2700 resistance. The path is now clear for the price to revisit the 1.2850 resistance level.

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• The euro tried to rally a bit during the trading session on Wednesday, but at this point we are still hanging around the same gap that we had formed a couple of weeks ago.
• This does make a certain amount of sense because we are still looking at the European elections, especially France.
• But we also have to pay close attention to the fact that the United Kingdom has parliament elections during the Thursday session.

There will be a significant amount of liquidity taken out of the market due to the US celebrating Independence Day. So with all of that, it makes sense that this is a market that we will continue to see a lot of indecision, a lot of lack of momentum. Therefore, I think we have to look at this through the prism of whether or not we can break above the 0.85 level. If we were to break above the 0.85 level, that would be a very bullish sign, but you can see we have already tried to do that and failed. The 50 day EMA is an indicator that is back in that area up. It does look like it’s going to be a significant barrier as well.

Underneath we have Support

Underneath we have the 0.84 level worth paying attention to as it is the floor in the market. If we break down below 0.84 that would be extraordinarily negative and at that point in time, we could see the euro really fall apart. All of that being said this is an area that the market has seen support in previously, so I think it all comes down to the question of whether or not longer term support holds. I do think it does.

Although a lot could change with the UK elections, we’ll just have to wait and see. I am more apt to buy the dip at the moment, but I also recognize that this is a very choppy pair and it’s also summertime, which takes away some of the liquidity as well.

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• EUR/USD picked up extra pace and surpassed 1.0800.
• The FOMC Minutes said rate hikes are on the table if inflation increases.
• Markets will now shift their attention to Friday’s NFP.

A marked decline in the US Dollar (USD) caused the USD Index (DXY) to revisit the 105.00 neighbourhood amidst the ongoing multi-session bearish move in the currency.

This strong downtick in the Greenback also kept the bid bias around EUR/USD well in place, lifting spot back above the key 1.0800 barrier as the likelihood of interest rate cuts by the Fed as soon as September gathered renewed impulse in response to dispiriting results from the US docket, especially from the labour market.

Collaborating with the better tone in the pair, market participants continued to assess the latest comments from ECB President Christine Lagarde at the ECB Forum on Tuesday, who emphasized that the euro zone has made significant progress towards disinflation, though economic growth uncertainties persist. At the same event, Chief Jerome Powell indicated that the Fed needs more data before considering rate cuts, aiming to verify if recent low inflation readings reflect sustained price pressures.

Overall, the macroeconomic situation remained stable on both sides of the Atlantic as the European Central Bank (ECB) is considering further rate cuts beyond the summer, with markets expecting two more cuts this year.

In contrast, there is still debate among market participants about whether the Federal Reserve (Fed) will implement one or two rate cuts this year, despite the Fed projecting just one cut, likely in December.

In what was the salient event of the session, the FOMC Minutes said that participants voted to keep the policy rate in the 5.25%–5.50% range. They recognised that progress in lowering inflation has been slower this year than they had anticipated in December. Furthermore, some participants emphasised the significance of patience before considering rate reduction, while others noted the potential need to hike rates again if inflation recovered. In addition to leaving interest rates constant, officials during the June meeting postponed the expected start of rate decreases. On this, new projections indicated that Fed officials, at the median, predicted only one quarter-point rate decrease this year vs. three cuts expected at the March 19-20 gathering.

According to the CME Group’s FedWatch Tool, there is about a 73% probability of lower interest rates in September, compared to nearly a 95% chance at the December 18 meeting.

In the short term, the recent ECB rate cut, contrasted with the Fed’s decision to maintain rates, has widened the policy gap between the two central banks, potentially leading to further weakness in EUR/USD.

However, the Eurozone’s emerging economic recovery and the perceived weakening of US fundamentals are expected to narrow this disparity, possibly providing occasional support for the pair in the near future.

Politically, the next risk event for the euro is the upcoming second round of the French snap elections on July 7.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further upside could see EUR/USD revisit the July high of 1.0816 (July 3), before the weekly top of 1.0852 (June 12) and the June peak of 1.0916 (June 4). The breakout of this level might bring the March high of 1.0981 (March 8) back on the radar, ahead of the weekly top of 1.0998 (January 11) and the psychological 1.1000 threshold.

If bears regain control, the pair may hit its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

So far, the 4-hour chart indicates a resurgence of the upside impetus. The initial resistance level is 1.0816, then 1.0852. The immediate support is at 1.0666, prior to 1.0649 and then 1.0601. The Relative Strength Index (RSI) increased to about 63.

• EUR/USD picked up extra pace and surpassed 1.0800.
• The FOMC Minutes said rate hikes are on the table if inflation increases.
• Markets will now shift their attention to Friday’s NFP.

A marked decline in the US Dollar (USD) caused the USD Index (DXY) to revisit the 105.00 neighbourhood amidst the ongoing multi-session bearish move in the currency.

This strong downtick in the Greenback also kept the bid bias around EUR/USD well in place, lifting spot back above the key 1.0800 barrier as the likelihood of interest rate cuts by the Fed as soon as September gathered renewed impulse in response to dispiriting results from the US docket, especially from the labour market.

Collaborating with the better tone in the pair, market participants continued to assess the latest comments from ECB President Christine Lagarde at the ECB Forum on Tuesday, who emphasized that the euro zone has made significant progress towards disinflation, though economic growth uncertainties persist. At the same event, Chief Jerome Powell indicated that the Fed needs more data before considering rate cuts, aiming to verify if recent low inflation readings reflect sustained price pressures.

Overall, the macroeconomic situation remained stable on both sides of the Atlantic as the European Central Bank (ECB) is considering further rate cuts beyond the summer, with markets expecting two more cuts this year.

In contrast, there is still debate among market participants about whether the Federal Reserve (Fed) will implement one or two rate cuts this year, despite the Fed projecting just one cut, likely in December.

In what was the salient event of the session, the FOMC Minutes said that participants voted to keep the policy rate in the 5.25%–5.50% range. They recognised that progress in lowering inflation has been slower this year than they had anticipated in December. Furthermore, some participants emphasised the significance of patience before considering rate reduction, while others noted the potential need to hike rates again if inflation recovered. In addition to leaving interest rates constant, officials during the June meeting postponed the expected start of rate decreases. On this, new projections indicated that Fed officials, at the median, predicted only one quarter-point rate decrease this year vs. three cuts expected at the March 19-20 gathering.

According to the CME Group’s FedWatch Tool, there is about a 73% probability of lower interest rates in September, compared to nearly a 95% chance at the December 18 meeting.

In the short term, the recent ECB rate cut, contrasted with the Fed’s decision to maintain rates, has widened the policy gap between the two central banks, potentially leading to further weakness in EUR/USD.

However, the Eurozone’s emerging economic recovery and the perceived weakening of US fundamentals are expected to narrow this disparity, possibly providing occasional support for the pair in the near future.

Politically, the next risk event for the euro is the upcoming second round of the French snap elections on July 7.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further upside could see EUR/USD revisit the July high of 1.0816 (July 3), before the weekly top of 1.0852 (June 12) and the June peak of 1.0916 (June 4). The breakout of this level might bring the March high of 1.0981 (March 8) back on the radar, ahead of the weekly top of 1.0998 (January 11) and the psychological 1.1000 threshold.

If bears regain control, the pair may hit its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

So far, the 4-hour chart indicates a resurgence of the upside impetus. The initial resistance level is 1.0816, then 1.0852. The immediate support is at 1.0666, prior to 1.0649 and then 1.0601. The Relative Strength Index (RSI) increased to about 63.