• EUR/USD maintained its constructive stance so far this week.
• Trading conditions remained thin and volatility was absent on the US holiday.
• Political concerns in Europe appear to have dwindled somewhat.

The US Dollar (USD) traded in a vacillating fashion in the low-105.00s when tracked by the USD Index (DXY) on Wednesday, providing humble support to risk sentiment and encouraging EUR/USD to extend its upside impulse for the third session in a row near the 1.0750 zone.

The pair’s marginal upward movement was also bolstered by easing political concerns in France, while speculation about potential Federal Reserve (Fed) interest rate cuts this year also accompanied the pair’s price action.

Regarding the Fed, the recent cautious stance from Fed officials appeared to limit the Greenback’s downside after they reiterated their prudent approach regarding the commencement of the Fed’s easing cycle.

On the latter, the CME Group’s FedWatch Tool now indicates a nearly 65% probability of lower interest rates by the September 18 meeting.

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

On this, it is worth noting that ECB Vice President Luis de Guindos emphasized on Tuesday that rate decisions will align with the release of the bank’s updated macroeconomic projections in September.

Looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to mitigate this disparity, providing some support for the pair on the short-term horizon.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the rebound in EUR/USD gathers impetus, the 200-day SMA at 1.0788 emerges as the immediate target, ahead of the weekly high of 1.0852 (June 12), and the June top of 1.0916 (June 4). The breakout of this level exposes the March peak of 1.0981 (March 8), seconded by the weekly high of 1.0998 (January 11) and the key 1.1000 threshold.

In case bears regain the upper hand, the pair may retest the June low of 1.0667 (June 14), prior to the May low of 1.0649 (May 1), and lastly the 2024 bottom of 1.0601 (April 16).

The 4-hour chart thus far shows some indications of gradual recovery. Bulls should aim for 1.0810 first, followed by 1.0852, 1.0916, and ultimately 1.0942. The initial support, instead, turns up at 1.0667, seconded by 1.0649 and 1.0601. The Relative Strength Index (RSI) has decreased to about 51.

• EUR/USD maintained its constructive stance so far this week.
• Trading conditions remained thin and volatility was absent on the US holiday.
• Political concerns in Europe appear to have dwindled somewhat.

The US Dollar (USD) traded in a vacillating fashion in the low-105.00s when tracked by the USD Index (DXY) on Wednesday, providing humble support to risk sentiment and encouraging EUR/USD to extend its upside impulse for the third session in a row near the 1.0750 zone.

The pair’s marginal upward movement was also bolstered by easing political concerns in France, while speculation about potential Federal Reserve (Fed) interest rate cuts this year also accompanied the pair’s price action.

Regarding the Fed, the recent cautious stance from Fed officials appeared to limit the Greenback’s downside after they reiterated their prudent approach regarding the commencement of the Fed’s easing cycle.

On the latter, the CME Group’s FedWatch Tool now indicates a nearly 65% probability of lower interest rates by the September 18 meeting.

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

On this, it is worth noting that ECB Vice President Luis de Guindos emphasized on Tuesday that rate decisions will align with the release of the bank’s updated macroeconomic projections in September.

Looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to mitigate this disparity, providing some support for the pair on the short-term horizon.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the rebound in EUR/USD gathers impetus, the 200-day SMA at 1.0788 emerges as the immediate target, ahead of the weekly high of 1.0852 (June 12), and the June top of 1.0916 (June 4). The breakout of this level exposes the March peak of 1.0981 (March 8), seconded by the weekly high of 1.0998 (January 11) and the key 1.1000 threshold.

In case bears regain the upper hand, the pair may retest the June low of 1.0667 (June 14), prior to the May low of 1.0649 (May 1), and lastly the 2024 bottom of 1.0601 (April 16).

The 4-hour chart thus far shows some indications of gradual recovery. Bulls should aim for 1.0810 first, followed by 1.0852, 1.0916, and ultimately 1.0942. The initial support, instead, turns up at 1.0667, seconded by 1.0649 and 1.0601. The Relative Strength Index (RSI) has decreased to about 51.

• For the third day in a row, the price of the pound sterling against the US dollar GBP/USD is trying to rebound higher with gains at the level of 1.2732.
• It is recovering from strong recent selling operations, which led to it moving towards the support level of 1.2656, its lowest in a month.
• During today’s session, Wednesday, the price of the pound sterling rose slightly after inflation in Britain fell to the Central Bank’s target of 2% in May, as expected.

According to the results of the economic calendar, British core inflation also fell to 3.5% from 3.9%, in line with expectations, and service inflation fell to 5.7% from 5.9%. Despite this, the Bank of England recently said that reaching the target inflation alone will not lead to a cut in interest rates. Moreover, the Bank of England is expected to keep its key interest rate at a 16-year high of 5.25% when it decides on monetary policy tomorrow, but most economists expect two rate cuts this year, with the first likely in August.

On the political front, recent polls show the Labor Party leading the upcoming July 4 election, while the Conservatives led by British Prime Minister Rishi Sunak are in second place.

According to reliable forex trading platforms, GBP/USD will rise if Dave Ramsden votes against a rate cut on Thursday, as this would significantly reduce the chances of a rate cut in August. The Bank of England is expected to keep interest rates at current levels on Thursday and indicate that any decision to cut rates will depend on upcoming data. Meanwhile, the consensus expects a 7-2 vote to keep rates unchanged. Overall, this would be a neutral outcome for the pound.

However, any shift in the voting structure could strongly suggest a shift in the MPC. The market is currently pricing in a 50-50 chance of a rate cut in August, and if those odds fall, sterling will rally.

With that in mind, any changes in the voting structure would provide a strong early signal that would affect the outlook for August.

Ultimately, the chance of a 6-3 vote for a rate cut is low, as this would suggest that another MPC member has looked at the strong inflation and survey data and believes it indicates a need for rate cuts. This would be very unusual. However, there is a higher chance that the MPC will revert to an 8-1 vote to keep rates on hold, with Dave Ramsden changing his vote in light of the stronger-than-expected inflation reading in April.

• 

Technical forecasts for the GBP/USD pair today:

According to the performance on the daily chart the bulls’ confidence in controlling the trend is back. Technically, the GBP/USD price is moving above the resistance of 1.2775, which supports the bullish outlook again. Furthermore, the stronger and more continuous control of the trend will be by moving towards the psychological resistance level of 1.3000. In contrast, and over the same period of time, the support of 1.2600 will be important for the strength of the downward shift. clearly, this will depend on the Bank of England’s decisions tomorrow and the future of British policy, in addition to the policy of global central banks.

Today, we expect the GBP/USD price to remain in narrow ranges in light of the American holiday.

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• At the start of trading today, Wednesday, USD/JPY is hovering bullishly around the 157.92 resistance level.
• The yen had gained some support from data showing stronger-than-expected Japanese export growth in May amid a weak yen and strong external demand.

Bank of Japan Governor Kazuo Ueda told the Japanese parliament earlier this week that they may raise interest rates again at the July meeting depending on upcoming economic data. Also, he warned that higher import costs caused by a weaker yen could weigh on household spending, but added that higher wages could boost consumption.

Last week, the Bank of Japan kept interest rates unchanged as widely expected, and said it would release a plan to reduce its bond-buying program at its next policy meeting in July. The yen fell sharply and approached three-decade lows after the decision, before paring those losses as market participants shifted their focus to the expected reduction in bond purchases and the possibility of more currency intervention.

According to the economic calendar, the Bank of Japan unanimously kept its key short-term interest rate at around 0% to 0.1% at its June meeting, as widely expected, after raising rates for the first time since 2007 and ending eight years of negative interest rates in March. At the same time, the governing board indicated that it may consider how to start reducing bond purchases at its July meeting. Clearly, the move was approved by an 8-1 vote, with board member Nakamura Toyoaki opposing, with the aim of allowing longer-term interest rates to move more freely.

In general, the Bank of Japan is currently buying around 6 trillion yen of bonds per month. The Friday statement said the Japanese economy had recovered moderately despite some areas of fragility. Private consumption had been resilient amid improving corporate profits and business spending. However, exports remained flat, as did public investment. On the inflation front, annual figures were in the 2 to 2.5% range, with inflation expectations rising modestly. Meanwhile, the core consumer price index is expected to rise gradually.

• 

USD/JPY Technical Analysis and Expectations Today

The general trend for USD/JPY remains bullish and may remain so until Japan intervenes in the forex markets to prevent further collapse of the currency exchange rate. Now, all eyes are on the psychological resistance level of 160.00 in case bulls move the currency pair towards the resistance levels of 158.30 and 159.00 respectively. According to the performance on the daily chart, breaking the current channel requires moving below the 155.00 level. Today is a US holiday, so the currency pair is expected to move in narrow ranges while maintaining the current upward trend.

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EUR/USD Current price: 1.0744

• ECB member Mario Centeno delivered yet another hawkish message.
•  The United States celebrates the Juneteenth holiday, local markets will remain closed.
• EUR/USD bullish in the near term, resistance at 1.0760, the weekly high.

The US Dollar is under mild selling pressure in a quiet Wednesday, helping EUR/USD advance towards the 1.0750 price zone. Stock markets trade mixed, confined to tight ranges around their opening levels, suggesting speculative interest lacks directional motivation.

The Euro found support in comments from European Central Bank (ECB) Governing Council member Mario Centeno. Centeno said that interest rates will be cut further if inflation slows, maintaining the hawkish bias set in the June ECB meeting.

Other than that, the Eurozone released the April Current Account, which posted a seasonally adjusted surplus of €38.6 billion, improving from the €35.8 billion posted in March and beating expectations. Construction Output in the same month contracted by 0.2%, better than the 0.5% loss from the previous month.

 The United States (US) published MBA Mortgage Applications for the week ended June 14, which rose 0.9%. It is worth reminding that the country celebrates the Juneteenth holiday, and local markets will remain closed, limiting FX activity throughout the American afternoon.

EUR/USD short-term technical outlook

The EUR/USD pair is up for a third consecutive day, although gains are modest. EUR/USD posted a weekly high at 1.0760 on Tuesday, the level to surpass to gain additional upward traction. Technically, however, the risk skews to the downside. The daily chart shows EUR/USD develops far below all its moving averages, with the 20 Simple Moving Average (SMA) heading modestly lower above flat 100 and 200 SMAs. The Momentum indicator aims marginally lower below its 100 level, while the Relative Strength Index (RSI) indicator consolidates at around 44, suggesting buyers remain sidelined.

According to the 4-hour chart, near-term advances seem likely. The EUR/USD pair is finding support around a now flat 20 SMA, although the 100 SMA crosses below the 200 SMA, limiting the upside in the 1.0810 price zone. Finally, technical indicators extend their advances above their midlines, in line with the latest bounce, although not enough to confirm a steady advance ahead.

Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0760 1.0810 1.0840

EUR/USD Current price: 1.0744

• ECB member Mario Centeno delivered yet another hawkish message.
•  The United States celebrates the Juneteenth holiday, local markets will remain closed.
• EUR/USD bullish in the near term, resistance at 1.0760, the weekly high.

The US Dollar is under mild selling pressure in a quiet Wednesday, helping EUR/USD advance towards the 1.0750 price zone. Stock markets trade mixed, confined to tight ranges around their opening levels, suggesting speculative interest lacks directional motivation.

The Euro found support in comments from European Central Bank (ECB) Governing Council member Mario Centeno. Centeno said that interest rates will be cut further if inflation slows, maintaining the hawkish bias set in the June ECB meeting.

Other than that, the Eurozone released the April Current Account, which posted a seasonally adjusted surplus of €38.6 billion, improving from the €35.8 billion posted in March and beating expectations. Construction Output in the same month contracted by 0.2%, better than the 0.5% loss from the previous month.

 The United States (US) published MBA Mortgage Applications for the week ended June 14, which rose 0.9%. It is worth reminding that the country celebrates the Juneteenth holiday, and local markets will remain closed, limiting FX activity throughout the American afternoon.

EUR/USD short-term technical outlook

The EUR/USD pair is up for a third consecutive day, although gains are modest. EUR/USD posted a weekly high at 1.0760 on Tuesday, the level to surpass to gain additional upward traction. Technically, however, the risk skews to the downside. The daily chart shows EUR/USD develops far below all its moving averages, with the 20 Simple Moving Average (SMA) heading modestly lower above flat 100 and 200 SMAs. The Momentum indicator aims marginally lower below its 100 level, while the Relative Strength Index (RSI) indicator consolidates at around 44, suggesting buyers remain sidelined.

According to the 4-hour chart, near-term advances seem likely. The EUR/USD pair is finding support around a now flat 20 SMA, although the 100 SMA crosses below the 200 SMA, limiting the upside in the 1.0810 price zone. Finally, technical indicators extend their advances above their midlines, in line with the latest bounce, although not enough to confirm a steady advance ahead.

Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0760 1.0810 1.0840

• UK inflation fell to the 2% BoE target for the first time in almost three years.
• UK services price inflation increased by 5.7%, more significant than the forecast 5.5%.
• US data on Tuesday showed soft retail sales in May.

The GBP/USD forecast shows a surge in bullish momentum after data from the UK showed that underlying inflation remains strong. Meanwhile, data in the previous session revealed a smaller-than-expected increase in US retail sales. 

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Data on Wednesday showed that UK inflation fell to the 2% BoE target for the first time in almost three years. However, underlying price pressures remained strong, with service price inflation increasing by 5.7%, which was more significant than the forecast of 5.5%. Consequently, the Bank of England might hesitate to lower borrowing costs.

While economists expect the BoE to start cutting rates in August, markets have lowered the likelihood of such an outcome from 50% before the report to 30%. At the same time, they now expect 44 basis points of cuts this year, down from 50. The shift to a less dovish outlook helped boost the pound on Wednesday.

Meanwhile, the dollar was on the back foot after US data on Tuesday showed soft retail sales in May. Economists had expected a more significant increase in sales for the month. The miss indicated weaker consumer spending and demand. 

As the US consumer reduces spending, the economy suffers, and inflation declines. As a result, investors believe the Fed has more reading to cut borrowing costs. For this reason, there is a 67% chance that the central bank will cut rates in September.

GBP/USD key events today

Investors will keep digesting inflation data as they await tomorrow’s Bank of England policy meeting.

GBP/USD technical forecast: Rebound meets strong SMA and Fib resistance

On the technical side, the GBP/USD price moved sharply from the 1.2700 key level to the 30-SMA resistance. However, the bias has yet to shift from bearish to bullish since the price is still testing the SMA resistance and the 0.382 Fib level. Nevertheless, bulls have gained momentum, as seen in the RSI, which has reached above 50. 

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Therefore, they may breach the SMA to retest the 1.2850 resistance level. However, there is a higher chance the SMA and the Fib level will hold firm, allowing bears to return and target the 1.2600 level. 

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• EUR/USD fluctuates in a tight channel above 1.0700 on Wednesday.
• Near-term technical highlights the lack of directional momentum.
• US markets will remain closed in observance of the Juneteenth Holiday.

EUR/USD struggles to find direction and fluctuates in a narrow band slightly below 1.0750 on Wednesday. The pair’s action could remain subdued as financial markets in the US will remain closed on in observance of the Juneteenth Holiday.

The US Dollar (USD) came under modest bearish pressure and EUR/USD edged higher in the early American session on Wednesday following the weaker-than-forecast Retail Sales data. Later in the session, comments from Federal Reserve (Fed) officials and the cautious market mood helped the USD find a foothold and limited EUR/USD’s upside. 

Alberto Musalem, incoming President of the St. Louis Fed, said on Tuesday that he would be willing to tighten policy further if inflation figures were to become stuck above the Fed’s 2% target. In the meantime, Dallas Fed President Lorie Logan remarked that the recent data indicating a slowdown in inflation is “encouraging,” but emphasized that the Fed must remain cautious and patient regarding interest-rate policy.

On Thursday, the US economic calendar will feature weekly Initial Jobless Claims and Building Permits data for May. Market participants will also continue to pay close attention to comments from central bank officials in the second half of the week.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat near 50, reflecting the pair’s indecisiveness. In case the pair manages to hold above 1.0730, where the Fibonacci 61.8% retracement of the latest uptrend is located, 1.0760 (Fibonacci 50% retracement) and 1.0800 (Fibonacci 38.2% retracement) could be seen as next resistance levels.

On the downside, 1.0700 (psychological level, static level) could be seen as interim support before 1.0670 (Fibonacci 78.6% retracement) and 1.0600 (beginning point of the uptrend).

 

• EUR/USD fluctuates in a tight channel above 1.0700 on Wednesday.
• Near-term technical highlights the lack of directional momentum.
• US markets will remain closed in observance of the Juneteenth Holiday.

EUR/USD struggles to find direction and fluctuates in a narrow band slightly below 1.0750 on Wednesday. The pair’s action could remain subdued as financial markets in the US will remain closed on in observance of the Juneteenth Holiday.

The US Dollar (USD) came under modest bearish pressure and EUR/USD edged higher in the early American session on Wednesday following the weaker-than-forecast Retail Sales data. Later in the session, comments from Federal Reserve (Fed) officials and the cautious market mood helped the USD find a foothold and limited EUR/USD’s upside. 

Alberto Musalem, incoming President of the St. Louis Fed, said on Tuesday that he would be willing to tighten policy further if inflation figures were to become stuck above the Fed’s 2% target. In the meantime, Dallas Fed President Lorie Logan remarked that the recent data indicating a slowdown in inflation is “encouraging,” but emphasized that the Fed must remain cautious and patient regarding interest-rate policy.

On Thursday, the US economic calendar will feature weekly Initial Jobless Claims and Building Permits data for May. Market participants will also continue to pay close attention to comments from central bank officials in the second half of the week.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat near 50, reflecting the pair’s indecisiveness. In case the pair manages to hold above 1.0730, where the Fibonacci 61.8% retracement of the latest uptrend is located, 1.0760 (Fibonacci 50% retracement) and 1.0800 (Fibonacci 38.2% retracement) could be seen as next resistance levels.

On the downside, 1.0700 (psychological level, static level) could be seen as interim support before 1.0670 (Fibonacci 78.6% retracement) and 1.0600 (beginning point of the uptrend).

 

Considering the comments from BoJ Governor Ueda, upbeat figures could fuel buyer demand for the Yen. Notably, upward import trends may ease BoJ concerns about the effects of a weak Yen on the Japanese economy.

After contracting in Q1 2024, an improving macroeconomic backdrop would fuel buyer demand for the Yen.

Nevertheless, inflation and Services PMI numbers will likely influence buyer appetite for the Yen more. The BoJ wants the services sector and household spending to fuel demand-driven inflation before raising interest rates.

While investors consider trade data from Japan, US economic indicators will draw investor attention amidst shifting sentiment toward a September Fed rate cut. The potential for a BoJ rate hike and Fed rate cut put the USD/JPY pairing and sub-150 in the spotlight.

US Economic Calendar: Housing Market Data and the Fed

Later in the session on Wednesday, the US housing sector will be in focus.

Economists forecast the NAHB Housing Market Index to remain steady at 45 in June.

Stronger-than-expected numbers could boost demand for the USD/JPY. Economists consider the housing sector a barometer of the US economy. An uptick in the Housing Market Index could bolster consumer confidence and spending. Tighter housing market conditions could push rents higher.

The services sector continues contributing to headline inflation, with the housing services sector a focal point for the Fed. Increasing rent trends and tight labor market conditions could keep the Fed from making any immediate policy changes, supporting demand for the US dollar.

In April, FOMC Member Austan Goolsbee highlighted the impact of rent trends on inflation, stating,

“I have been expecting it to come down more quickly than it has. If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”

Investors will focus on US economic indicators alongside shifting sentiment regarding a possible Fed rate cut in September.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on central bank chatter, inflation numbers from Japan, and Services PMIs. Will these factors align to propel the Yen forward, or will uncertainties keep it anchored?

USD/JPY Price Action

Daily Chart

The USD/JPY hovered comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY move to the 159 handle could signal a climb toward the April 29 high of 160.209.

Central bank chatter, trade data from Japan, and US housing sector data require investor attention.

Conversely, a USD/JPY drop below the 157.5 handle could bring the 50-day EMA into play. A fall through the 50-day EMA could give the bears a run at the 151.685 support level.

The 14-day RSI at 60.20 suggests a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.

• Since yesterday, the USD/JPY price has been steady bullish around the 157.95 resistance level.
• It reached the 158.26 resistance level last week, as investors continued to assess the Bank of Japan’s monetary policy outlook considering its latest decision.

Last week, the Bank of Japan left interest rates unchanged as widely expected, and said it would maintain the current pace of Japanese government bond purchases.

However, the BOJ added that it will release a plan to reduce its bond-buying program at its next policy meeting in July. Also, BOJ Governor Kazuo Ueda warned that currency movements have a significant impact on the economy and prices, a notable change from previous comments that a weak yen has little impact on inflation.

According to currency trading platforms, the Japanese yen fell sharply and approached its lowest levels in three decades after the decision. This was before reducing those losses as market participants shifted their focus to the expected reduction in bond purchases and the possibility of further currency intervention.

On the economic calendar data front, the University of Michigan’s US Consumer Confidence Index published its preliminary readings for June 2024. Its reading came after a one-year inflation reading of 3.5% for May 2024, the highest inflation reading the index has recorded since November 2023. Furthermore, inflation expectations for the coming year were unchanged this month at 3.3%, above the 2.3-3.0% range seen in the two years prior to the pandemic.

However, long-term inflation expectations rose from 3.0% last month to 3.1% this month. The June reading should be interpreted as essentially unchanged from May. Moreover, long-term inflation expectations have been remarkably stable over the past three years but remain elevated compared to the 2.2-2.6% range seen in the two years before the pandemic, said Joanne Hsu, director of consumer surveys.

Consumer sentiment was little changed in June; the month’s reading was a statistically insignificant 3.5 points lower than in May and within the margin of error. That means sentiment is about 31% higher than its June 2022 low amid rising inflation. Today’s consumer confidence reading came in at 65.6 for the June preliminary reading — well below expectations and from last month. Recently, the previous reading for the index was 67.4 for the May preliminary reading. Overall, analysts had expected a reading of around 72 for June, up from April’s reading of 69.1. That means today’s reading was well below market expectations for the month.

The monthly readings of the US Consumer Confidence Index released by the University of Michigan are seen as a measure of the American public’s confidence in the short- and medium-term health of the US economy. Markets such as the stock market are known to be influenced by the index, so the University of Michigan Consumer Confidence Index is often a leading indicator of how much consumers are spending, and therefore how much (or how little) the US economy is growing.

Ultimately, lower-than-expected or declining consumer confidence numbers are often a sign of slowing US economic growth, as well as for the US dollar. Conversely, a higher or above-expected reading can be seen as a bullish indicator for both the US dollar and the broader US economy. Also, it is one of the many metrics that the Federal Reserve closely watches and considers when it comes to making monetary policy decisions.

• 

USD/JPY Technical Analysis and Expectations Today

Ahead of the important US retail sales figures, the USD/JPY pair is consolidating its broader bullish trajectory. There is a chance of a move towards the psychological resistance level of 160.00 if the US retail sales figures come in stronger than expected. Technically, this level may push the technical indicators towards strong overbought levels. On the other hand, according to the performance on the daily chart, moving towards the 155.00 level will be important to start breaking the general upward trend. So far, by considering that in the event of an expected Japanese intervention in the currency markets, the currency pair may be exposed to strong selling operations to take profits.

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• EUR/USD’s upside impetus faltered around 1.0760.
• The Greenback navigated an unconvincing range in the low-105.00s.
• Economic Sentiment in Germany fell short of estimates in June.

The US Dollar (USD) added to the negative start to the week and receded marginally on Tuesday, lending some tepid support to the risk complex and lifting EUR/USD to as high as the 1.0760 zone, where some initial resistance seems to have emerged.

The pair’s marginal advance also found support in somewhat subsiding political concerns in France, while poor data in the US docket weighed on the Greenback and re-ignited speculation of two interest rate cuts by the Federal Reserve (Fed) this year. 

Back to the Fed, the broad-based cautious tone from Fed policymakers on Tuesday seems to have limited the downside in the US Dollar. On this, Boston Federal Reserve President Susan Collins warned against overstating recent inflation data, stating that it was not the appropriate moment for the Fed to reduce interest rates. In addition, Federal Reserve Governor Adriana Kugler noted that inflation is showing promising signs of moderating, but suggested that if economic conditions continue to improve, it would be suitable to consider lowering interest rates later this year. Her colleague, Richmond Fed President Thomas Barkin, said he needed to analyze more months of economic data before supporting a rate cut.

According to the CME Group’s FedWatch Tool, the probability of lower interest rates by the September 18 meeting now stands at nearly 67%.

In the near term, the recent rate cut by the European Central Bank (ECB) in contrast to the Federal Reserve’s decision to hold rates has widened the policy divergence between the two central banks, potentially exposing EUR/USD to additional weakness.

However, looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to help mitigate this discrepancy, offering some support to the currency pair.

Meanwhile, ECB Vice President Luis de Guindos emphasized that the optimal timing for rate decisions aligns with the release of the bank’s updated macroeconomic projections, scheduled for September.

Turning to domestic developments, Economic Sentiment in Germany saw a marginal improvement to 47.5 in June, while it rose to 51.3 for the broader euro area. Still in the region, final Inflation Rate figures indicated that the headline Consumer Price Index (CPI) increased by 2.6% YoY in May, with the core CPI rising by 2.9% over the same period.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the downturn continues, EUR/USD might retest the June low of 1.0667 (June 14), ahead of the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

Looking higher, the 200-day SMA is at 1.0788, ahead of the weekly high of 1.0852 (June 12), followed by the June top of 1.0916 (June 4) and the March peak of 1.0981 (March 8). Further north, the weekly high of 1.0998 (January 11) precedes the critical 1.1000 level.

The 4-hour chart thus far indicates some signs of healing. Bulls should aim for 1.0810 before 1.0852, then 1.0916, and finally 1.0942. 1.0667 is the first number to fall, followed by 1.0649 and 1.0601. The Relative Strength Index (RSI) dropped to around 48.

• EUR/USD’s upside impetus faltered around 1.0760.
• The Greenback navigated an unconvincing range in the low-105.00s.
• Economic Sentiment in Germany fell short of estimates in June.

The US Dollar (USD) added to the negative start to the week and receded marginally on Tuesday, lending some tepid support to the risk complex and lifting EUR/USD to as high as the 1.0760 zone, where some initial resistance seems to have emerged.

The pair’s marginal advance also found support in somewhat subsiding political concerns in France, while poor data in the US docket weighed on the Greenback and re-ignited speculation of two interest rate cuts by the Federal Reserve (Fed) this year. 

Back to the Fed, the broad-based cautious tone from Fed policymakers on Tuesday seems to have limited the downside in the US Dollar. On this, Boston Federal Reserve President Susan Collins warned against overstating recent inflation data, stating that it was not the appropriate moment for the Fed to reduce interest rates. In addition, Federal Reserve Governor Adriana Kugler noted that inflation is showing promising signs of moderating, but suggested that if economic conditions continue to improve, it would be suitable to consider lowering interest rates later this year. Her colleague, Richmond Fed President Thomas Barkin, said he needed to analyze more months of economic data before supporting a rate cut.

According to the CME Group’s FedWatch Tool, the probability of lower interest rates by the September 18 meeting now stands at nearly 67%.

In the near term, the recent rate cut by the European Central Bank (ECB) in contrast to the Federal Reserve’s decision to hold rates has widened the policy divergence between the two central banks, potentially exposing EUR/USD to additional weakness.

However, looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to help mitigate this discrepancy, offering some support to the currency pair.

Meanwhile, ECB Vice President Luis de Guindos emphasized that the optimal timing for rate decisions aligns with the release of the bank’s updated macroeconomic projections, scheduled for September.

Turning to domestic developments, Economic Sentiment in Germany saw a marginal improvement to 47.5 in June, while it rose to 51.3 for the broader euro area. Still in the region, final Inflation Rate figures indicated that the headline Consumer Price Index (CPI) increased by 2.6% YoY in May, with the core CPI rising by 2.9% over the same period.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the downturn continues, EUR/USD might retest the June low of 1.0667 (June 14), ahead of the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

Looking higher, the 200-day SMA is at 1.0788, ahead of the weekly high of 1.0852 (June 12), followed by the June top of 1.0916 (June 4) and the March peak of 1.0981 (March 8). Further north, the weekly high of 1.0998 (January 11) precedes the critical 1.1000 level.

The 4-hour chart thus far indicates some signs of healing. Bulls should aim for 1.0810 before 1.0852, then 1.0916, and finally 1.0942. 1.0667 is the first number to fall, followed by 1.0649 and 1.0601. The Relative Strength Index (RSI) dropped to around 48.

• GBP/USD trades below 1.2700 after hitting a two-day high of 1.2720.
• Resistance at a broken support trendline could lead to further price drops.
• Key support levels: 1.2656 (June 14 low) and 1.2643/34 (100-DMA confluence and May 3 high).

The Pound Sterling creeps lower against the US Dollar on Tuesday, amid a scarce economic docket in the UK following the release of mixed data in the United States. At the time of writing, the GBP/USD trades at 1.2688, down 0.12%.

GBP/USD Price Analysis: Technical outlook

Following a dip to a multi-week low of 1.2656, the GBP/USD has shown signs of resilience, managing to regain some ground. However, it’s important to note that it still hovers below a one-month broken support trendline turned resistance, which could potentially lead to further price drops.

Momentum shows that sellers remained unchanged, as revealed by the Relative Strength Index (RSI).

If GBP/USD drops below 1.2700, the exchange rate will continue to fall and face the first support, at 1.2656, the June 14 low. Once cleared, the next stop would be the 100-day moving average (DMA) confluence and the May 3 high at 1.2643/34, ahead of 1.2600.

Conversely, if GBP/USD climbs past 1.2720/30, that could exacerbate a rally toward 1.2800.

GBP/USD Price Action – Daily Chart