Published on Jun 15, 2023

Daily Analysis For EUR/USD 15-06-2023

EUR/USD Analysis

Key Points: -

· The EUR/USD currency pair is gradually advancing and reaches a one-month high, signaling a consistent upward movement over the past three days, coinciding with the European Central Bank (ECB) day.

· As anticipated, the Federal Reserve (Fed) aligns with the expected pause in monetary tightening, but the likelihood of a rate hike in July strengthens the significance of upcoming economic data.

· Jerome Powell, the Chair of the Federal Open Market Committee (FOMC), endorses an approach that assesses the situation on a meeting-by-meeting basis, yet he suggests that the July meeting holds the potential for active decision-making.

· While the ECB's projected 0.25% rate hike is imminent, the proponents of a more aggressive stance have limited influence to defend their position, indicating a possible retracement of the Euro's strength.

Today's Scenario: -

EUR/USD bulls are experiencing a period of positivity as they temporarily pause at the highest levels seen in a month. After rising consecutively for three days, the currency pair retreated from 1.0864 to 1.0830 during the early hours of the European Central Bank (ECB) monetary policy meeting on Wednesday. It is important to note that the US Federal Reserve (Fed) confirmed the market's expectations of halting the rate hike trajectory, but their hawkish stance weighed on the Euro pair. Nonetheless, the optimistic expectations of the central bank in the Eurozone keep the buyers hopeful ahead of the significant event.

During Wednesday's meeting, the Federal Open Market Committee (FOMC) decided to maintain the benchmark Fed rate within the range of 5.0-5.25%, aligning with market forecasts of pausing the rate hike cycle that had been ongoing for the past 1.5 years, which included ten consecutive rate increases. However, the hawkish signals conveyed through the FOMC Economic Projections and Fed Chair Powell's speech support a bullish bias towards the US central bank.

Notably, the dot plot for 2024 and 2025 rose by 30 basis points (bps) from March, reaching 4.6% and 3.4%, respectively, while the median rate forecasts indicate the possibility of two more rate hikes in 2023. Moreover, no rate cuts or recessions are anticipated for the current year, and the median estimation for the US Gross Domestic Product (GDP) increased to 1.0% from 0.4% in March. Additionally, Powell's speech revealed an approach of assessing the situation on a "meeting by meeting" basis but hinted at July as a crucial meeting, suggesting a potential 0.25% rate hike.

In other news, Germany's Wholesale Price Index experienced a 1.1% drop in May, slightly below the expected -1.0% and the previous -0.4%. On the other hand, Eurozone Industrial Production saw a 1.0% increase in April, surpassing the anticipated 0.8% and recovering from the revised -3.8% decline. Meanwhile, the US Producer Price Index (PPI) for May decreased to 1.1% year-on-year (YoY), falling short of the expected 1.5% and the previous 2.6%.

Amidst these developments, the market remained volatile, and Wall Street closed with mixed results. The yield on the US 10-year Treasury bond decreased by 1.0 basis point (bps) to 3.79%, while its two-year counterpart reached a three-month high at 4.70%.

Looking ahead, secondary data from the Eurozone may attract the attention of EUR/USD traders, along with pre-ECB speculations, as hopes persist for a 0.25% rate hike. The Euro bulls will rely on hawkish comments from President Christine Lagarde and positive economic projections to maintain control.

Diagram of EUR/USD: -

Economic Events: -

Date Event Impact Currency

0:00 (United States) Fed Press Conference High USD

4:15 (New Zealand) GDP Growth Rate YoY Medium NZD

4:15 (New Zealand) GDP Growth Rate QoQ Medium NZD

5:20 (Japan) Foreign Bond Investment Low JPY

5:20 (Japan) Stock Investment by Foreigners Low JPY

5:20 (Japan) Machinery Orders YoY Medium JPY

5:20 (Japan) Machinery Orders MoM Medium JPY

5:20 (Japan) Imports YoY Low JPY

5:20 (Japan) Balance of Trade High JPY

5:20 (Japan) Exports YoY Medium JPY

5:30 (Euro Area) Eurogroup Meeting Medium EUR

7:00 (Australia) Consumer Inflation Expectations Low AUD

7:00 (Australia) Part Time Employment Chg Medium AUD

7:00 (Australia) Participation Rate Low AUD

7:00 (Australia) Full Time Employment Chg Medium AUD

7:00 (Australia) Unemployment Rate High AUD

7:00 (Australia) Employment Change High AUD

7:00 (Australia) RBA Bulletin Medium AUD

7:00 (China) PBoC 1-Year MLF Announcement Low CNY

7:00 (China) House Price Index YoY Medium CNY

7:30 (China) Unemployment Rate High CNY

7:30 (China) Retail Sales YoY High CNY

7:30 (China) Industrial Production YoY High CNY

7:30 (China) Fixed Asset Investment (YTD) YoY Medium CNY

9:05 (Japan) 3-Month Bill Auction Low JPY

10:00 (Japan) Tertiary Industry Index MoM Low JPY

10:00 (Netherlands) Unemployment Rate Medium EUR

10:30 (Finland) GDP YoY Low EUR

12:00 (Switzerland) Producer & Import Prices MoM Low CHF

12:00 (Switzerland) Producer & Import Prices YoY Low CHF

12:15 (France) Inflation Rate MoM Medium EUR

12:15 (France) Inflation Rate YoY Medium EUR

12:15 (France) Harmonised Inflation Rate MoM Low EUR

12:15 (France) Harmonised Inflation Rate YoY Low EUR

13:30 (Spain) Balance of Trade Medium EUR

14:10 (Spain) Obligacion Auction Low EUR

14:10 (Spain) Bonos Auction Low EUR

14:30 (Euro Area) Balance of Trade Medium EUR

14:30 (France) 5-Year OAT Auction Low EUR

14:30 (France) 3-Year OAT Auction Low EUR

14:30 (Greece) Construction Output YoY Low EUR

14:30 (Montenegro) Inflation Rate YoY Low EUR

14:30 (Montenegro) Harmonised Inflation Rate YoY Low EUR

14:30 (Montenegro) Inflation Rate MoM Low EUR

15:00 (Belgium) Construction Output YoY Low EUR

15:30 (France) 10-Year Index-Linked OAT Auction Low EUR

15:30 (Ireland) Balance of Trade Low EUR

16:00 (Portugal) Economic Activity YoY Low EUR

16:00 (Portugal) Private Consumption YoY Low EUR

17:45 (Canada) Housing Starts Medium CAD

17:45 (Euro Area) ECB Interest Rate Decision High EUR

17:45 (Euro Area) Marginal Lending Rate Low EUR

17:45 (Euro Area) Deposit Facility Rate High EUR

18:00 (Canada) Manufacturing Sales MoM Low CAD

18:00 (United States) Import Prices YoY Low USD

18:00 (United States) Export Prices YoY Low USD

18:00 (United States) Import Prices MoM Medium USD

18:00 (United States) Export Prices MoM Medium USD

18:00 (United States) NY Empire State Manufacturing Index Medium USD

18:00 (United States) Retail Sales YoY High USD

18:00 (United States) Retail Sales Ex Autos MoM High USD

18:00 (United States) Retail Sales MoM High USD

18:00 (United States) Philly Fed Business Conditions Low USD

18:00 (United States) Philly Fed Employment Low USD

18:00 (United States) Philly Fed CAPEX Index Low USD

18:00 (United States) Philly Fed Prices Paid Low USD

18:00 (United States) Philly Fed New Orders Low USD

18:00 (United States) Philadelphia Fed Manufacturing Index Medium USD

18:00 (United States) Jobless Claims 4-week Average High USD

18:00 (United States) Continuing Jobless Claims High USD

18:00 (United States) Initial Jobless Claims High USD

18:00 (United States) Retail Sales Ex Gas/Autos MoM High USD

18:15 (Euro Area) ECB Press Conference High EUR

18:30 (Belgium) Balance of Trade Low EUR

18:30 (Kosovo) GDP Growth Rate YoY Low EUR

18:45 (United States) Capacity Utilization Low USD

18:45 (United States) Manufacturing Production YoY Low USD

18:45 (United States) Industrial Production YoY Medium USD

18:45 (United States) Industrial Production MoM Medium USD

18:45 (United States) Manufacturing Production MoM Low USD

19:30 (United States) Business Inventories MoM Medium USD

19:30 (United States) Retail Inventories Ex Autos MoM Low USD

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

21:00 (United States) 8-Week Bill Auction Low USD

21:00 (United States) 4-Week Bill Auction Low USD

21:05 (United Kingdom) BoE Cunliffe Speech Low GBP

21:30 (Canada) 2-Year Bond Auction Low CAD

21:30 (United States) 15-Year Mortgage Rate Low USD

21:30 (United States) 30-Year Mortgage Rate Low USD

Buy Scenario: -

The expectations of a hawkish stance from the ECB contribute to the Euro pair's upward movement, which is further supported by the break above the 100-day moving average (DMA). Additionally, the bullish signals from the moving average convergence divergence (MACD) and the relative strength index (RSI) (14) add to the positive sentiment, indicating that the market is not yet overbought.

Consequently, the bulls in the EUR/USD are poised to test the resistance level at 1.0860, which coincides with the 38.2% Fibonacci retracement level of the upward movement observed from January to April, as well as the swing low on April 10.

However, the 50-day moving average obstacle around 1.0875 and multiple resistance levels seen since late January near 1.0930 may pose challenges for the EUR/USD bulls in the subsequent stages.

If the EUR/USD manages to remain firm beyond 1.0930, the focus will shift towards the round figure of 1.1000 and the peak reached in February at 1.1033, till we do not advise to buy EUR/USD currency pair.

Sell Scenario: -

On the other hand, a daily close below the 100-DMA, which now acts as support around 1.0800, does not necessarily imply a strong bearish signal for the Euro. The downside movement faces a convergence of a rising trend line established over the past week and the 50% Fibonacci retracement level, creating a significant challenge for the bears near 1.0790.

In the event that the EUR/USD bears prevail below 1.0790, there is a possibility of further downward movement towards the 61.8% Fibonacci retracement level and an upward-sloping support line originating from January, which are located at approximately 1.0715 and 1.0650, respectively. Till then we do not advise selling EUR/USD.