EUR/USD hangs at 1.0500 on broad US Dollar weakness ahead of Fed’s Powell

  • The absence of North American traders kept the EUR/USD subdued in a tight range.
  • Fed Waller accepts a rate hike of 75 basis points in July.
  • The ECB’s Lagarde expects a rate hike in July and September, although the latter depends on the medium-term inflation outlook.
  • EUR/USD Price Prediction: The bearish pattern of harami candles and the interest rate differential between the Fed and the ECB are benefiting the greenback.

The common currency is almost flat at the start of the Asian session, after remaining confined in the 1.0472-1.0545 range on Monday, on a thin liquidity trading session due to a public holiday in the United States. At the time of writing, EUR/USD is trading at 1.0512, forming a bearish harami candle chart pattern that could push prices down to the June 17th low at 1.0444.

Sentiment remains bullish, as seen by the rise in Asian equity futures. The absence of US traders kept the greenback down, as seen by the US Dollar Index, down 0.16% to 104.483. Although they remain above the 3% threshold, US Treasury yields remain under pressure.

Fed and ECB speakers made headlines

Elsewhere, Fed speakers have begun to cross threads. Throughout the weekend, Fed member Christopher Waller backed a 75 basis point rate hike in July, saying inflation must be brought down regardless of the cause. Meanwhile, Cleveland Fed Chair Loretta Mester noted that inflation would miss the Fed’s 2% target, while mentioning that although the Summary of Economic Projections (SEP) for the Fed believes the US economy is slowing, it said it “does not expect a recession”.

ECB President Christine Lagarde said she plans to raise key ECB rates again in September after a 25 basis point hike in July, while the calibration of the September hike will depend on the outlook. medium-term inflation rates. In addition, ECB Chief Economist Philip Lane said very high inflation means there is a risk that the psychology of inflation could take hold and said the larger increase for a rate hike in September does not represent a red-alert assessment of inflation.

Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision, and there’s no preview beyond September of what will be the appropriate pace of tightening.

In the week ahead, an absent economic calendar from the Eurozone will leave traders drifting towards the US economic record. The US record will include the Chicago Fed’s national activity index for May, existing home sales and the Richmond Fed’s Thomas Barkin, which will cross the wires twice.

EUR/USD Price Prediction: Technical Outlook

EUR/USD is still biased lower. Although the major has consolidated in the 1.0472-1.0545 range over the past three days, the interest rate differential between the ECB and the Fed is benefiting the greenback.

Therefore, EUR/USD will remain under pressure. That said, the first support for EUR/USD would be the June 17th daily low at 1.0444. A break of the latter would expose the June 16th low at 1.0380, followed by the year-to-date low at 1.0348.

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