- Having begun the month of May with signs of upwards momentum taking place in the last week of April, the EUR/USD promptly fell to a low of 1.06500 on the 1st of May.
- However, since this low water mark was seen the EUR/USD again started to show signs of percolation and correlated to the broad Forex markets well.
- Behavioral sentiment has taken on a more positive tone regarding the potential of the Federal Reserve to lower the Federal Funds Rate in the mid-term and this has helped the EUR/USD gain.
We have seen this show before. The EUR/USD was trading near the 1.08810 ratio on the 9th of April, this before the door was seemingly slammed on financial institutions and optimistic outlooks. This as U.S inflation data continued to spread bad news. However, in recent weeks U.S data has turned in lackluster growth and there is some evidence inflation may be eroding. As of this writing the EUR/USD is near the 1.08425 ratio with a couple of more days of trading left in May.
U.S Economic Data and Sentiment Looking Forward
The U.S will publish important GDP numbers this Thursday which will include growth and inflation readings. The last Gross Domestic Product reports printed in the U.S suddenly showed growth had substantially dropped. If tomorrow’s report comes in weaker than anticipated and the Price Index can meet its expectation or come in a little lower, this may create stability for the EUR/USD to maintain its current price range. Then on Friday the critical U.S PCE Price Index will be released and this inflation number will create immediate action in the EUR/USD going into the weekend.
While some signs of negative data were seen in late April which led to the rise from the lows around the 1.06000 level on the 16th of April to highs around 1.07530 on the 26th of April, this was not enough to sustain upwards momentum. May’s trading has been helped by the weaker U.S growth numbers and signs of decreased concerns regarding inflation. But one bad number could turn the tide again and make financial institutions cautious. Yet, the bullish trend which has been strong in May and produced a high near 1.08945 on the 16th of May has not lost that much ground. Yes, the Forex crowd may believe the EUR/USD got a little ahead of itself, but the ability to stay above 1.0800 rather comfortably is a bullish sign regarding sentiment.
EUR/USD Near-Term and the Weeks Ahead
- If U.S data is slightly weaker in the near-term this will help solidify current EUR/USD sentiment and could fuel more speculative buying.
- The European Central Bank will announce its Main Refinancing Rate on the 6th of June; many analysts would like to see the ECB cut its interest rate.
- However the Federal Reserve will release its FOMC Statement on the 12th of June and the Fed is likely to remain cautious, but might suggest an interest rate could come during the summer.
- If the Fed sounds more dovish during their FOMC Statement this could help the EUR/USD gain.
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EUR/USD Outlook for June 2024:
Speculative price range for EUR/USD is 1.07910 to 1.10310
The momentum upwards in the EUR/USD was strong in May and may have caught even bullish traders by surprise. Recent price action although it has produced a bit of a selloff, has kept the currency pair’s value within a rather optimistic value range and suggests financial institutions may believe more upside is possible. This week’s coming GDP and inflation data from the States will be important. Next week’s ECB rhetoric will be intriguing, though possibly not what many analysts want to hear.
If support levels continue to prove durable and the EUR/USD is able to maintain value above the 1.08100 to 1.83000 marks in the near-term, this may be a sign that more bullish behavioral sentiment will create upwards price velocity again during June. If the EUR/USD gets a positive dose of news via a more dovish Federal Reserve in a couple of weeks, this could ignite the currency pair beyond the 1.09000 level. Day traders should be braced for volatility, the EUR/USD has produced fast trading in the past handful of months and folks using too much leverage have likely been burned by reversals.
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