Daily Analysis For EUR/USD  20-06-2023

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.


Support and Resistance Level: -

Support             Resistance  

S1 1.0904   -     R1 1.0943

S2 1.0886   -     R2 1.0964

S3 1.0865   -     R3 1.0982


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