- The EUR/USD is projected to reach 1.1572 as the market reacts to a recent missile strike on Israel.
- Market sentiment from the Fed is shifting towards a more dovish stance following disappointing manufacturing data from the US.
- Traders are listening closely to comments from ECB officials as they await the Fed’s policy decision on June 18.
The EUR/USD bounced back after a 0.25% decline last Friday, largely driven by the increasing tensions between Israel and Iran, which had initially strengthened the dollar. However, there are signs that the risk of continued conflict might be easing, which would play in favor of the euro.
At present, the EUR/USD is trading at 1.1572, reflecting a 0.17% uptick after hitting a low of 1.1523. It’s interesting to note that recent manufacturing figures from the New York region show a significant drop, marking the weakest performance in two years—a sign of an ongoing economic slowdown.
Meanwhile, the situation in Israel and Iran continues to dominate the news cycle, even as the White House urges a resolution. Iranian state media has reported a new series of missile attacks directed at Israeli cities, including Tel Aviv and Haifa.
In other news, key figures from the European Central Bank (ECB) were present at recent discussions. Notably, Vice President Luis de Guindos and Bundesbank President Joachim Nagel spoke, further emphasizing the economic landscape. Additionally, S&P has reaffirmed Germany’s creditworthiness with a “AAA” rating and a stable outlook.
Despite the ongoing tensions in the Middle East, market sentiment seems to be shifting positively. Investors are looking ahead to the Fed’s upcoming monetary policy meeting on June 18, which will include a press conference by Chairman Jerome Powell. The Fed will also provide updates to its economic forecasts, which are crucial for guiding future monetary policy and could influence EUR/USD movements.
Daily Digest Market Mover: EUR/USD recovers as market sentiment improves
- Even with recent pullbacks, EUR/USD seems ready to resume a rising trend. ECB officials leaning hawkish and US-China dialogue potentially easing investor worries are contributing factors, although heightened tensions in Israel and Iran are putting pressure on the pair.
- ECB’s De Guindos remarked that 1.15 in EUR/USD isn’t a significant barrier, indicating that the ECB is more aligned with market expectations. He mentioned that the chance of falling inflation is low and that inflation risks are balanced.
- Nagel from the ECB cautioned against indicating any pause or cut in rates due to the high level of uncertainty.
- The New York Fed’s Empire State Manufacturing Index showed a decline of 16 points for June, a notable drop from May’s -5.5, painting a gloomy economic picture for the area.
- Retail sales data from the US Census Bureau are anticipated to show a -0.7% contraction for May, down from April’s 0.1% growth. This would place sales at one of their lowest levels since February.
- The Fed’s latest monetary policy meeting is scheduled for June 17-18, with traders anticipating stability in rates but paying close attention to updates on economic forecasts.
- Across the Atlantic, the June ZEW economic sentiment survey in the EU is predicted to rise from 11.6 in May to 23.5.
- Financial market players expect that during the ECB’s July monetary policy meeting, there will be no reduction in deposit facility rates to 25 basis points.
Euro Technology Outlook: EUR/USD is over 1.1550.
The upward trajectory of EUR/USD is facing significant resistance at the 1.1600 mark. The hesitation among buyers to surpass this level has led to a slight retreat. The relative strength index (RSI) suggests a lack of commitment from buyers, remaining near the neutral line despite a generally positive outlook.
If EUR/USD falls below 1.1550, the next support level would be at 1.1500. Should this occur, further support may be found at 1.1450, followed by a 20-day Simple Moving Average (SMA) at 1.1386.
On the flip side, if EUR/USD remains above 1.1550, buyers could push the exchange rate to test the year-to-date high of 1.1631, with the next critical resistance point being 1.1700.
