This is the lowest in two and a half months, before settling around the 1.1920 level at the time of writing the analysis. Rebound attempts still need more momentum. Investors are counting on the testimony of US Central Bank Governor Jerome Powell today to halt the sharp gains of the US dollar recently, which is an important factor for attempts to correct upwards for the recent currency pair.
The EUR/USD pair recorded its biggest weekly decline since March 2020.
The sharp strength of the US dollar increased after the monetary policy decision in June. The announcement of the quarterly outlook from the Federal Reserve included a point-of-expectation chart for the Fed funds rate range showing that a majority of the eighteen members of the Federal Open Market Committee (FOMC) now see up to two interest rate hikes before the end of 2023.
Commenting on the performance of the currency pair, Jane Foley, currency analyst at Rabobank said, “Although we did not expect such a big move in the US dollar, our forecast for the EUR/USD pair was opposite to the consensus and we expect an uptick in dollar strength this summer. Due to the possibility of a partial rebound in the US dollar movement, we currently hold our previous expectations at 1.20 support on a 1 month view followed by a move to 1.17 from a 6 month perspective.”
Despite the clear improvement in the outlook for the dollar in the medium term, there are also a number of technical reasons why the EURUSD pair could find at least some temporary recovery over the coming days. For his part, says Kenneth Brooks, strategist at Societe Generale. “The US central bank statement widened the exchange rate differences between the US and the euro and accelerated the unwinding of euro long positions. The breach of key technical levels in quick succession culminated in the decline below the 1.19 support. That could open a return to the 1.17 support this summer especially if strong incoming US data advances the policy discussion on tapering at the upcoming FOMC meeting in July.”
In addition, another factor supporting the euro is the starting level of the critical two-year US government bond yield over which the Federal Reserve exercises strict control. The movements here have indirect effects on all currencies, but especially those that offer lower interest rates and associated bond yields such as the euro, Japanese yen and Swiss franc.
EUR/USD technical analysis: The price of the EUR/USD currency pair is still under downward pressure as long as it is stable below the psychological support 1.2000. The continuation of the bears’ control may push the pair to stronger support levels that represent at the same time appropriate levels for buying, and the closest to them are currently 1.1825 and 1.1755 and 1.1690 straight. On the upside, the bears' control over the general trend will not stop without moving towards the 1.2200 resistance level, as is the performance on the daily time frame.
As for today's economic calendar data: There are no significant European data today. The number of existing US home sales will be announced and then the testimony of US Federal Reserve Governor Jerome Powell.
