Published on Jun 20, 2023

Daily Analysis For EUR/USD 20-06-2023

EUR/USD Analysis

Key Points: -

· Amidst the market's ongoing consolidation following a lackluster calendar and the US holiday, the EUR/USD currency pair shows signs of recovery as it gathers buying interest to trim its recent losses.

· Despite unimpressive statistics from the bloc, officials from the European Central Bank (ECB) stand firm in defending their hawkish bias.

· However, the Euro price faces downside pressure due to challenges to market sentiment and comments from the Federal Reserve.

· The forthcoming testimony of Fed Chair Jerome Powell and the release of Purchasing Managers' Index (PMI) data hold significant importance in determining the immediate trajectory.

Today's Scenario: -

In the early hours of Tuesday's Asian session, the EUR/USD currency pair rebounds from a two-day decline and successfully repels bearish pressure, reaching its highest levels in five weeks at 1.0925. This recovery aligns with the hawkish signals conveyed by European Central Bank (ECB) officials. It is worth noting that the Federal Reserve (Fed) has also been indicating the possibility of higher interest rates. However, the recent pause in the rate hike by the US central bank, coupled with mixed economic data, raises doubts about the Fed policymakers' ability to raise rates.

Peter Kazimir, a policymaker at the ECB, stated on Monday, "We need to raise rates again in July." Similarly, ECB Chief Economist Philip Lane expressed that another rate hike in July appears appropriate but emphasized that the decision in September will depend on incoming data, according to Reuters. Additionally, ECB Governing Council member Isabelle Schnabel highlighted that the risks to the inflation outlook are skewed to the upside. Schnabel also emphasized the necessity of continuing to raise interest rates until there is convincing evidence that underlying inflation aligns with a return of headline inflation to 2%.

Conversely, the Fed's monetary policy reports to the US Congress and recent comments from Fed officials have taken on a hawkish tone. The Fed's policy report for Congress stated, "Inflation in the US is well above target and the labor market remains very tight," as reported by Reuters. This sentiment supported the US Dollar Index (DXY). Several Fed representatives, including Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee, and Federal Reserve Governor Christopher Waller, also expressed mildly hawkish views, contributing to the DXY's rebound from a multi-day low.

In addition to the ECB-Fed dynamics, concerns about the global economic recovery amid rising interest rates have exerted downward pressure on the EUR/USD price. This is particularly evident amidst positive yields in the Eurozone and the UK, as well as declining equity markets. It is important to note that the US Dollar Index (DXY) has risen over the past two days after reaching its lowest level in a month, currently retreating to 102.45.

Furthermore, escalating tensions between the US and China over Taiwan, along with concerns about China's growth prospects, have affected sentiment, as well as the Juneteenth holiday in the US. Notably, the US National Association of Home Builders (NAHB) survey climbed to 55.0 in June from the previous reading of 50.0, marking the highest level in 11 months and supporting the DXY's upward movement before the recent retracement.

Looking ahead, as markets fully resume, traders of the EUR/USD pair will be focused on US housing data on the economic calendar. However, significant attention will be given to Fed Chair Jerome Powell's Testimony and the preliminary readings of June's Purchasing Managers' Index (PMI) for a clearer short-term outlook.

Diagram of EUR/USD: -

Economic Events: -

Date Event Impact Currency

02:30 (New Zealand) Westpac Consumer Confidence Low NZD

06:45 (China) Loan Prime Rate 1Y Medium CNY

06:45 (China) Loan Prime Rate 5Y Medium CNY

07:00 (Australia) RBA Meeting Minutes High AUD

07:05 (Australia) RBA Kent Speech Medium AUD

09:00 (Australia) RBA Bullock Speech Medium AUD

10:00 (Japan) Industrial Production MoM Low JPY

10:00 (Japan) Industrial Production YoY Low JPY

10:00 (Japan) Capacity Utilization MoM Low JPY

10:30 (Estonia) PPI YoY Low EUR

10:30 (Estonia) PPI MoM Low EUR

10:30 (Finland) Unemployment Rate Low EUR

11:30 (Germany) PPI MoM Medium EUR

11:30 (Germany) PPI YoY Low EUR

11:30 (Switzerland) Balance of Trade Medium CHF

13:30 (Euro Area) Current Account Low EUR

13:30 (Euro Area) Current Account s.a Low EUR

13:30 (Greece) Current Account Low EUR

13:30 (Euro Area) ECB Enria Speech Low EUR

14:30 (Euro Area) Construction Output YoY Low EUR

14:30 (Italy) Current Account Low EUR

14:30 (United Kingdom) 5-Year Treasury Gilt Auction Low GBP

15:00 (Germany) 2-Year Schatz Auction Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

15:30 (Luxembourg) Unemployment Rate Low EUR

15:30 (Slovakia) Unemployment Rate Low EUR

16:00 (United States) Fed Bullard Speech Medium USD

17:15 (Euro Area) ECB McCaul Speech Low EUR

18:00 (United States) Housing Starts Medium USD

18:00 (United States) Building Permits High USD

18:00 (United States) Housing Starts MoM Medium USD

18:00 (United States) Building Permits MoM Medium USD

19:00 (Slovenia) Unemployment Rate Low EUR

19:15 (Euro Area) ECB McCaul Speech Low EUR

20:30 (New Zealand) Global Dairy Trade Price Index Low NZD

21:00 (United States) 3-Month Bill Auction Low USD

21:00 (United States) 6-Month Bill Auction Low USD

21:15 (United States) Fed Williams Speech Medium USD

22:30 (El Salvador) Balance of Trade Low USD

22:40 (Euro Area) ECB Guindos Speech High EUR

Buy Scenario: -

On the contrary, a downward-sloping resistance line from Friday, near 1.0920, precedes the most recent peak at 1.0970, acting as an immediate barrier to the upside for EUR/USD.

However, a clear breakthrough of the 1.0970 level would not hesitate to challenge the psychological magnet of 1.1000, followed by an attempt to reach the yearly highs near the 1.1100 zone, till we do not advise to buy EUR/USD currency pair.

Sell Scenario: -

The inability to defend the bullish bias is further emphasized by the multiple tops observed around 1.1100 in April and May. However, the RSI (14) line below 50 poses a challenge for the bears of EUR/USD.

At present, the descending support line from Friday, around 1.0900, becomes a key level to monitor for Euro bears. Subsequently, the convergence of the 100-Hour Moving Average (HMA) and an ascending trend line that has formed over the past week, near 1.0890, will provide resistance to the EUR/USD bears.

It is important to note that an upward-sloping support line from June 07, currently around 1.0850, serves as the last line of defense for EUR/USD buyers. A breach of this level will confirm the short-term bearish trend of the major currency pair. Till then we do not advise selling EUR/USD.