Published on Jun 14, 2023

Daily Analysis For EUR/USD 14-06-2023

EUR/USD Analysis

Key Points: -

· EUR/USD extends its consecutive days of gains as it retraces from its highest levels seen since late May.

· Despite predominantly negative economic data from Germany and the European Union, the currency pair fails to attract bearish sentiment due to the challenge posed by US inflation on the Federal Reserve's potential interest rate hike.

· Anticipation grows for the possibility of receiving a more hawkish guidance from the US central bank, with focus on economic forecasts, the dot-plot, and Chairman Powell's upcoming speech.

· Eurozone Industrial Production figures and US Producer Price Index are expected to provide some entertainment for Euro traders prior to the important Federal Open Market Committee (FOMC) meeting.

Today's Scenario: -

EUR/USD experiences a decline, reaching an intraday low near 1.0785, as it retraces from its recent gains achieved at the highest levels seen in three weeks on the day of the Federal Reserve (Fed) meeting, which falls on Wednesday. The Euro pair, however, managed to rise over the past two days, reaching a multi-day high of 1.0823, before retreating due to prevailing anxiety ahead of the Fed meeting. It is important to note that mixed economic data from Germany and the Eurozone, combined with hopes of a more hawkish stance from the Fed, supported buyers, even with underlying momentum from US inflation driving prices higher.

On Tuesday, the final readings for Germany's May inflation, as measured by the Harmonized Index of Consumer Prices (HICP), remained unchanged at 6.3% year-on-year. Additionally, the German ZEW Survey revealed that the Economic Sentiment Index pleasantly surprised in June, rising to -8.5 from the previous -10.7, surpassing market expectations of -13.0. However, the Current Situation Index dropped to -56.5 from the previous -34.8, falling short of analysts' estimations of -40.0. On a broader scale, the Eurozone ZEW Economic Sentiment Index declined to -10.0 from the previous -9.4, missing the market's anticipated -1.5.

On the other hand, the US Consumer Price Index (CPI) showed a larger-than-expected decline, with the monthly and yearly figures reaching 0.1% and 4.0%, respectively. However, the Core CPI, which excludes Food & Energy, aligned with forecasts at 0.4% monthly and 5.3% yearly. Notably, the US headline CPI reached its lowest level since March 2021, supporting the market's expectation of a more dovish approach from the Federal Reserve (Fed), consequently weighing on the US Dollar.

Following the disappointing US inflation data, the CME's FedWatch Tool now suggests a greater than 90% probability of no rate hike by the Fed during today's monetary policy meeting, compared to around a 75% probability before the release.

Conversely, some former Fed officials have been advocating for a more hawkish stance to spur EUR/USD buyers. On Tuesday, former Dallas Federal Reserve Bank President Robert Kaplan expressed support for a "hawkish pause" at this week's meeting, while also leaving the possibility of a rate hike in July open. Additionally, former Boston Fed President Eric Rosengren tweeted, "Expect a hawkish skip this week."

Against this backdrop, major US stock market indices rose for the second consecutive day, but US Treasury bond yields remained firm. The 10-year Treasury bond yields reached a 13-day high of 3.83%, while the two-year counterpart climbed to its highest level in three months at 4.70% before easing to 4.67% in recent hours. It is worth noting that the S&P 500 Futures currently reflect a cautious market sentiment, lacking a clear direction.

Looking ahead, the pre-Fed anxiety may limit EUR/USD movements, but Eurozone Industrial Production figures for April and the US Producer Price Index (PPI) for May could provide some entertainment for Euro traders.

Furthermore, there are high expectations in the market regarding a 0.25% interest rate hike by the European Central Bank (ECB), further emphasizing the divergence between the ECB and the Fed and instilling hope among Euro buyers. The focus also remains on the US central bank's economic forecasts, the dot-plot, and Chairman Jerome Powell's press conference, which are anticipated to provide clearer guidance.

Diagram of EUR/USD: -

Economic Events: -

Date Event Impact Currency

02:00 (United States) API Crude Oil Stock Change Medium USD

04:15 (New Zealand) Current Account Medium NZD

05:30 (New Zealand) Food Inflation YoY Low NZD

10:00 (Netherlands) Balance of Trade Low EUR

10:30 (Finland) Inflation Rate YoY Low EUR

10:30 (Finland) Inflation Rate MoM Low EUR

10:30 (Finland) CPI Low EUR

11:30 (United Kingdom) GDP 3-Month Avg Medium GBP

11:30 (United Kingdom) Goods Trade Balance Non-EU High GBP

11:30 (United Kingdom) Balance of Trade Low GBP

11:30 (United Kingdom) Construction Output YoY Low GBP

11:30 (United Kingdom) Industrial Production YoY Low GBP

11:30 (United Kingdom) Industrial Production MoM Medium GBP

11:30 (United Kingdom) Manufacturing Production YoY Low GBP

11:30 (United Kingdom) Manufacturing Production MoM Medium GBP

11:30 (United Kingdom) Goods Trade Balance High GBP

11:30 (United Kingdom) GDP YoY Low GBP

11:30 (United Kingdom) GDP MoM High GBP

11:30 (Germany) Wholesale Prices MoM Medium EUR

11:30 (Germany) Wholesale Prices YoY Medium EUR

12:30 (China) FDI (YTD) YoY Medium CNY

12:30 (Slovakia) Inflation Rate MoM Low EUR

12:30 (Slovakia) Inflation Rate YoY Low EUR

12:30 (Slovakia) Core Inflation Rate MoM Low EUR

12:30 (Slovakia) Core Inflation Rate YoY Low EUR

12:30 (Slovakia) CPI Low EUR

13:30 (France) IEA Oil Market Report Medium EUR

14:30 (Euro Area) Industrial Production MoM Medium EUR

14:30 (Euro Area) Industrial Production YoY Low EUR

14:30 (Montenegro) GDP Growth Rate YoY Low EUR

15:00 (Germany) 10-Year Bund Auction Medium EUR

15:30 (Portugal) Inflation Rate MoM Low EUR

15:30 (Portugal) Inflation Rate YoY Low EUR

15:30 (Portugal) CPI Low EUR

15:30 (Ireland) Residential Property Prices YoY Low EUR

15:30 (Ireland) Residential Property Prices MoM Low EUR

16:30 (United States) MBA 30-Year Mortgage Rate Medium USD

16:30 (United States) MBA Mortgage Applications Low USD

16:30 (United States) MBA Mortgage Refinance Index Low USD

16:30 (United States) MBA Mortgage Market Index Low USD

16:30 (United States) MBA Purchase Index Low USD

17:00 (United Kingdom) NIESR Monthly GDP Tracker Low GBP

18:00 (Canada) New Motor Vehicle Sales Low CAD

18:00 (United States) Core PPI MoM Medium USD

18:00 (United States) Core PPI YoY Low USD

18:00 (United States) PPI YoY Low USD

18:00 (United States) PPI MoM High USD

20:00 (United States) EIA Heating Oil Stocks Change Low USD

20:00 (United States) EIA Refinery Crude Runs Change Low USD

20:00 (United States) EIA Crude Oil Stocks Change Medium USD

20:00 (United States) EIA Distillate Stocks Change Low USD

20:00 (United States) EIA Gasoline Production Change Low USD

20:00 (United States) EIA Crude Oil Imports Change Low USD

20:00 (United States) EIA Gasoline Stocks Change Medium USD

20:00 (United States) EIA Cushing Crude Oil Stocks Change Low USD

20:00 (United States) EIA Distillate Fuel Production Change Low USD

21:00 (United States) 17-Week Bill Auction Low USD

23:30 (United States) Fed Interest Rate Decision High USD

23:30 (United States) FOMC Economic Projections High USD

23:30 (United States) Interest Rate Projection - 1st Yr Medium USD

23:30 (United States) Interest Rate Projection - 2nd Yr Medium USD

23:30 (United States) Interest Rate Projection - Current Medium USD

23:30 (United States) Interest Rate Projection - Longer Medium USD

Buy Scenario: -

The immediate upside for the EUR/USD pair faces challenges from the 200-bar Exponential Moving Average (EMA) located near 1.0800. Additionally, the top line of a rising channel that has been in place for a week acts as a resistance zone around 1.0820.

If the Euro bulls manage to push beyond the 1.0820 level, attention will turn to the convergence of the 50% Fibonacci retracement of the May downward move and the upper boundary of a bullish channel that has been forming for the past two weeks, which is currently around 1.0865. In such a scenario, there could be a possibility of a gradual rise towards the psychological level of 1.1000, till we do not advise to buy EUR/USD currency pair.

Sell Scenario: -

On the downside, a break below the bottom line of the immediate bullish channel, located around 1.0770, could prompt intraday sellers to take control of the EUR/USD pair. Subsequently, a swift decline towards 1.0730 cannot be ruled out.

However, the key level to watch for the Euro bears' conviction lies at the lower boundary of the broader ascending trend channel, currently around 1.0700. Till then we do not advise selling EUR/USD.