Euro Remains On The Defensive And Supported Near 1.0920

The European currency (EUR) maintained the offered stance well at the beginning of the week and motivated EUR/USD to recede to daily lows in the 1.0925/20 band on the back of the decent recovery in the US Dollar.

Indeed, sellers remain in control of the sentiment around the euro on Monday, forcing the spot to give away part of last week’s gains to the 1.0970 regions, or multi-week highs, as investors continue to adjust to the recent hawkish messages from both the European Central Bank (ECB) and the Federal Reserve at their meetings on June 14 and June 15, respectively.

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 rise in July, while Chief Jerome Powell also left the door open to a similar move at the July 26 gathering. This scenario is favored with nearly 75% probability, according to CME Group’s FedWatch Tool.

Still around the ECB, Board member I. Schnabel stressed that the inflation outlook remains tilted to the upside. At the same time, her colleague P. Lane suggested another quarter-point rate hike in July looks appropriate.

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 critical ECB meeting on June 15.

In the US data space, the housing market will be in the limelight following the release of the NAHB Housing Market Index for June.

Daily digest market movers: Euro could face some near-term consolidation 

  • The US Dollar flirts with the 55-day SMA near 102.50.
  • Markets will likely focus on the meeting between US A: Blinken and China’s Xi Jinping.
  • Fed’s J. Powell’s testimonies will be the salient events later in the week.
  • ECB’s G. Simkus deemed premature any talk regarding the September meeting.
  • The ECB-Fed policy divergence remains the almost exclusive driver of the pair’s price action for the time being

Technical Analysis: Further upside keeps targeting 1.1000

The Euro (EUR) has retreated slightly from its new monthly high of 1.0970 on June 16. To make further gains, it needs to overcome this level quickly, potentially allowing it to reach the psychological barrier of 1.1000. If it continues to climb, the following primary resistance levels are 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 stands at 1.1181.

If the bears take control, there is 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) before the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).

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