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Euro slide continuesThe month of July has been an unmitigated disaster for the euro - with only three trading sessions in the books, EUR/USD has declined a staggering 2.73%. Earlier in the day, the euro dropped to 1.0186, its lowest level since December 2002. The euro appears headed for parity with the US dollar, a psychologically significant level. The economic outlook in the eurozone is not an encouraging one. Inflation surged to 8.1% in May, surpassing the April record of 7.4%. A peak in inflation remains elusive, and the ECB is way behind the inflation curve - the central bank hasn't raised interest rates yet, which are in negative territory. Even so, a lukewarm eurozone economy means that raising rates poses the risk of a recession. The energy situation has been deteriorating, as sanctions against Russia have led to counter moves in which Moscow has reduced its gas exports to Europe, which could result in an energy shortage this winter. If Russia reduces oil or gas exports to Europe, prices will soar and this could cause a severe economic downturn. A strike by Norwegian oil and gas workers on Tuesday threatened to exacerbate the situation. The Norwegian government has stepped in and ended the strike, but investors remain nervous as the eurozone's energy situation could become precarious. Today's data out of the eurozone showed some improvement but did little to raise risk sentiment. Germany's Factory Orders rose 0.1% in May, up from -1.6% in April but still a negligible gain. It was a similar story for eurozone retail sales, which came in at 0.2% in May after a -1.4% read in April. On Thursday, Germany releases Industrial Production for May, which is expected to slow to 0.7%, down from 0.4%. EUR/USD faces resistance at 1.0124. Below, there is support at 1.0075 There is resistance at 1.0221 and 1.0324
by OANDA
EUR/USD -29/06/2022-• Trend is still bearish despite latest rally • The pair broke below the rising wedge; a bearish pattern, drawn on the chart yesterday and closed below it, reinforcing the bearish picture • Also, descending trend line since Feb 2022 still acts as resistance, today near 1.06 • Horizontal resistance highlighted in gray color (around 1.08) is a major resistance to be watched • As long as the pair is trading below those resistance levels, it is highly likely that we will see lower prices in the coming days/weeks • Bears had a successful engulfing bearish candle today and are targeting YTD lows at 1.03 followed by 1.02 and parity • Recession fears, Russia-Ukraine war, FED-ECB policy gap supports the bearish picture
Short
by RamziAbouAbdallah-CMT
Out of resistance comes strengthSince we last covered Euro Dollar in our Timing is everything! piece, the pair has traded lower, playing out exactly to our assessment and hitting both of our price targets. However, things have changed quite a bit ever since. Inflation has skyrocketed in the EU and the ECB seems ready to start playing catch-up on rate hikes. Looking at the charts, the Euro Dollar pair has been trading in a triangle pattern with prices bouncing off the support multiple times but failing to breakthrough. The 1.0400 level seems to mark the longer-term resistance, which has been tested multiple times but held strong. We see these as confirmation of a strong resistance. With prices close to the resistance now, we favor the long side in the short term and expect the pair to make its way to the top of the triangle. Entry at 1.04880, stops at 1.03575. Target at 1.0630. Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
CME:6E1!Long
by inspirante
Euro slides as inflation jumpsThe euro is sharply lower on Friday and is currently trading just above the 1.04 line, down 0.76%. Eurozone CPI for June was higher than expected, at 8.6% YoY. The estimate stood at 8.4% and inflation rose sharply from the May reading of 8.1%. This marked a record-high. There was better news from the core reading, which dropped marginally to 3.7% YoY, down from 3.8% in May. Investors have given the inflation data a thumbs-down today and sent the euro tumbling ahead of the weekend. With inflation continuing to accelerate and the ECB revising downwards its growth forecast, the spectre of stagflation in the bloc remains very real. The ECB is no doubt dismayed that inflation was higher than expected, but it's unclear if the record-high CPI release will be enough to deliver a supersize 0.50% hike for its lift-off next month. At this week's ECB forum, ECB head Lagarde talked tough and downplayed concerns over a recession, but there are plenty of dark clouds hovering above the eurozone economy. High inflation, weak growth and the energy crisis with Russia mean that there is certainly good reason to be concerned about a significant downturn in the eurozone economy. In the US, there are worrying signs that the economy is weakening. US Personal Spending fell to 0.3%, down from 0.6% (0.4% exp.). Inflation appears to be declining slowly and the labour market is in solid shape. CME's FedWatch is putting the likelihood of a supersize 0.75% rate increase at 75%, as markets expect the Fed to remain aggressive against inflation. Can a recession be avoided? Fed Chair Powell is saying all the right things in downplaying concerns about the "R" word, but many market participants have their doubts and feel that the US economy will not be able to avoid a recession. .
by OANDA
EUR/USD Pushes Higher As ECB Forum Gets Underway The EUR/USD pair pushed higher on Monday and closed with gains for the second session in a row as the greenback weakened across the board. The pair reached a daily high of 1.0614 but failed to consolidate above 1.0600 and pulled back during the New York session. At the time of writing, the EUR/USD is trading around 1.0580, up 0.25% on the day. The euro moved higher, underpinned by the rise in German yields, while the greenback exhibited weakness across the board despite the advance in US yields. Wall Street indexes had a positive start but then turned south and closed in the red. Market participants continue to assess the impact of monetary policy on employment and growth as major central banks have embarked on contracting cycles. Meanwhile, the European Central Bank Forum on Central Banking got underway in Portugal, with the main focus on Wednesday’s policy panel that will feature ECB, BoE and Fed leaders. From a technical perspective, the EUR/USD holds a slightly positive short-term bias according to the daily chart, although the inability to establish itself above 1.0600 is a sign of momentum lacking. If the euro manages to break above the psychological level, it would face key resistance at a descending trendline coming from February’s highs, currently around 1.0650. A rise past this trendline would improve the pair’s short-term outlook. On the other hand, the immediate support level is seen at daily lows in the 1.0550 area, followed by the 1.0500 mark and then the 1.0470 zone.
by Alex_Boltyan_FXAnalyst
Selection is not dead - and who said Growth ever was?INVESTMENT CONTEXT Lithuania limited railway cargo transit across its territory from Russia to Kaliningrad; Russia dubbed the move as "openly hostile" Russia overtook Saudi Arabia as China’s biggest supplier of crude oil. Russian crude exports to China surged 55% in May Turkey, Sweden and Finland met to discuss Turkey's opposition to the Nordic countries bid to join NATO French President Emmanuel Macron lost parliamentary majority as the country's far-right regained momentum after the Presidential elections held last April European Commission President Ursula von der Leyen warned against the bloc's "backsliding" into coal as the continent tries to weave itself off Russian gas Terra/LUNA project staff were banned from flying as South Korean authorities deepen investigations on LUNA's demise PROFZERO'S TAKE It's hard to look at the EU without feeling something disruptive is about to happen. The bloc's inflation rate is not too far from that of the U.S. (8.1% vs. 8.6%, respectively) - yet the ECB's base rate, even after the 25bps hike earlier in June, is still negative by 25bps, while the Fed is already pricing cash at 150bps. The Fed has stopped sustaining fixed income markets by not rolling over USD 30bn Treasury bonds and USD 17.5bn MBS per month - the ECB tried to walk down the same path, only to face backlash from traders which sent interest rates on the weakest countries (Greece, Italy and Spain) to fresh highs. And as Russia curtails natural gas supplies, the countries that are most exposed to energy security - notably including Germany and Italy - scramble to diversify the energy mix, stumbling upon the harsh reality that coal will attract criticism from environmental groups (and voters) while LNG supplies need re-gasification plants - whose dearth won't be made up for until 2024. Nigel Bolton, BlackRock's co-Chief Investment Officer, said on June 20 he saw "extreme valuation opportunity in European banks". ProfZero would really, sincerely like to share the same optimism - or opportunism Speaking of Europe - after dismissing blockchain assets as "worth nothing" (and therefore badly needing regulation, in a rare moment of pure pneumatic vacuum of logics), ECB President Christine Lagarde said "While the correction in asset prices has so far been orderly, the risk of a further and possibly abrupt fall in asset prices remains severe". ProfZero concurs with Madame Lagarde - absent energy security and supply strategy, foggy monetary policy (to tighten or not to tighten?) and a much feared fragmentation of borrowing costs already happening, traders are having it good shorting European assets. If only there was a strong Regulator... In the opinion of ProfZero, the market-wise breadth of June 13's collapse has a deeper structural meaning, and could in fact contain cues on portfolio construction to cross summer season: (i) Markets are not done pricing a recession, nor the Fed's and the ECB monetary policy. After the 50bps rate hike on May 5, the S&P 500 and Nasdaq plunged 3.56% and 4.99%, respectively; after the 75bps rate increase on June 15, the indexes nosedived 3.27% and 4.08%, respectively. The Fed is meeting four more times this year; current expectations are for 75bps flat increases at each meeting. Should inflation fail to be absorbed in the economy, calling for more rate increases, equities would bear the brunt of the selloffs, (ii) Investors are starting to see Value as fairly priced - possibly signaling the beginning of reversal on commodity stocks, especially in the energy space. At the same time, Growth is not dead. Apple (AAPL), Alphabet (GOOG) and Microsoft (MSFT) dropped less than 5% on average in the last month, compared to almost 15% by Occidental Petroleum (OXY), Petrobras (PBR), and Shell (RDS.A), (iii) It is still too early to construct risk positions. A clear trough has not been touched and even a touted recession has not materialized. No clear industrial path has emerged from the bear market; and without such, longs are but reckless positions. No time to cry; no time to risk either
CME:BTC1!
by ProfZero
EUR/USD Stabilizes Above 1.0500, Braces For July LiftoffThe EUR/USD pair advances slightly at the weekly opening in the absence of relevant economic data and showing limited reaction to the statements of several members of the European Central Bank Governing Council, including president Christine Lagarde. At the time of writing, EUR/USD is trading around 1.0515-20, 0.2% above its opening price, having hit an intraday high of 1.0545 during the European session. In her statement before the European Parliament, Lagarde said the bank plans to raise the policy rate by 25 points next month, while she also left the door open for another hike in September. Furthermore, Lagarde declined to comment on any details of the ECB's new bond-buying tool while stressing that fighting fragmentation is a precondition for the success of the monetary policy. She also said conditions are in place for further economic growth in the region. Meanwhile, in the United States, the stock and bond markets remain closed this Monday in observance of the Juneteenth holiday. The dollar, measured by the DXY index, trades lower which, coupled with a new advance in 10-year German Bund yields, has favored the European currency's gains. Looking ahead, Fed Chairman Jerome Powell's testimonies to Congress on Wednesday and Thursday will be key events of the week. From a technical point of view, the EUR/USD pair maintains a neutral bias in the short term, although the long-term outlook remains bearish. The daily RSI shows a positive slope, still below its midline, while the MACD prints decreasing red bars, which could signal a continuation of the upward correction in the coming days. On the upside, the 20-day moving average offers immediate resistance at the 1.0620 area, followed by the psychological level of 1.0700, which is reinforced by a downtrend line drawn from the February highs, and then the 1.0770 zone. On the other side, immediate support is seen at the 1.0450 area, followed by the 1.0400 psychological level. A break below this latter would pave the way to retest the cycle low of 1.0349. Then, the next support could be found around 1.0300.
by Alex_Boltyan_FXAnalyst
SharktoothINVESTMENT CONTEXT U.S. stocks dropped sharply on growing fears of recession. S&P 500 dropped 3.27% on June 16, recording its steepest weekly decline (more than 6%) since March 2020 To calm the fears of a new debt crisis in EU, the ECB is reportedly structuring a specific bond-buying program specifically aimed at supporting its most indebted economies Turkey maintains its opposition to Finland and Sweden joining NATO For the first time since 2007 the Swiss National Bank raised its policy rate by 50bps Russia increased the cut of natural gas supply to Italy to 35%, sending TTF up 25% U.S. mortgage rates at 5.78% hit the maximum since 2008, causing new home constructions to fall by 14.4% in May Blockchain assets are dragged by investors shunning risk assets across the board. BTC is repeatedly testing USD 20k strong resistance, seen by some analysts as "critical" before a raft of leveraged trades get margin-called, potentially causing position defaults PROFZERO'S TAKE On June 16, ahead of the market open, ProfZero called the feeble rebound of June 15 a "dead cat's bounce" - nothing different from what happened on May 6, two days after the Fed announced a 50bps interest rate increase: after an initial relief trade, market engaged a steep sell-off, one that brought Nasdaq from 12.9 to 11.4k within a week. Until markets will have embraced the deep rooting of the current disruption; will have stopped looking at Regulators for cheap and quick fixes, and will have started to work on structural solutions on energy and food - ProfZero argues we are bound to trade in a nervous, sharktooth, lose-lose type of environment It is not "are we holding 20k on BTC?" that should be asked. Rather: "what for is it worth paying 20k?"
CME:BTC1!
by ProfZero
Does the Fed matter?INVESTMENT CONTEXT Markets are weighing a possible 75bps rates hike at today's FOMC meeting. Were the Fed to follow suit on traders' expectations, it would be the steepest tightening since 1994 Traders price 255bps rate hikes from the Fed in its five remaining meetings this year China's central bank refrained from cutting the interest rate to protect yuan from policy divergence with the U.S. Freeport LNG announced its Texas assets will remain offline until September, and recover to full operations only in early 2023. Freeport LNG represents 10% of European seaborne energy supplies Russia plans to reduce capacity of gas supply on Nord Stream pipeline by 40% The U.S. extended till December 5 (instead of June 24) the validity of the license "authorizing transactions related to energy" to Russian entities under sanctions Coinbase (COIN) will shed a fifth of its staff amidst the rout in blockchain assets. COIN shares are down 85% from IPO price tag PROFZERO'S TAKE While ProfOne ponders whether monetary policy is really the right place to look at to solve a crisis which is wholly industrial in nature, ProfZero keeps reminding that fixed income markets have taken for granted for too long the support from Central Banks. To see Italy now trying to roll over its debt without the safety net laid by the ECB will be a thing to behold - hopefully, only for positive reasons Russia pulling the plug on gas while the U.S. quietly offers the means to avoid a much-spooked default; the channels of diplomacy are apparently running on a real low profile - but with what endgame in mind? While speaking at the TechCrunch Sessions on June 15, Bill Gates characterized cryptocurrencies and NFTs as a market driven by sentiment. “As an asset class, it’s 100% based on the greater fool theory - that somebody’s going to pay more for it than I do”, he argued. Indeed, the faith of blockchain asset holders is being put to test - just as much as in March 2020 or in the ICO crash of 2017. Even through this, ProfZero sticks by its mantra: always look at the fundamentals. While hype has definitely played a role ever since the infancy of the blockchain industry, the merits of the technology are there to be seen - if in doubt, ask any trader how a transaction is processed, and how many operational risks are taken at each and every step. Also Mr. Gates' understanding of NFTs leaves ProfZero dubious: the market of fine arts has left dusty auction houses and brought artists closer to investors, while beyond that, tokenization is nothing but the zeitgeist of the post-consumeristic era. Is this a call to BTC to USD 1mln (like Microstrategy's Michael Saylor reiterated recently)? Absolutely not. It is a call - to stay focused on the only thing that matters - value PROFONE'S TAKE Markets are waiting for today's decision of Federal Reserve about the next step of its rates-rising campaign. Hedge fund manager Bill Ackman said the Fed could help restore market confidence if it raises rates by 75bps today and in July - yet he also advised that 100bps would be better. On a markedly wilder note, investment manager Jeffrey Gundlach urged the Fed to take rates to 3% in one go - today. Amidst such notorious opinions, ProfOne's question is - does the Fed really matter? Actual inflation is one of fundamentals (energy and food); in May the Congressional Budget Office (CBO) forecasted inflation to cool to 2.7% only in 2023, implying that by the end or 2022 we may expect the figure to settle hardly lower than 5%. As argued also by ProfZero, this crisis is different from 2008 or 2020 - it is a crisis of the very industrial system that has been working for the last 20 years. Certainly monetary policy can and is providing already its contribution. But finance can't magically restructure energy, food and technology supply chains built in decades. There was a time when Wall Street was thought to make money just by waving its magic wand; the Great Financial Crisis brought that sorcery show to an end. Hopefully, we won't repeat the same mistake again
CME:BTC1!
by ProfZero
Surprise? What surprise?INVESTMENT CONTEXT S&P 500 and Nasdaq recorded their worst week since January, sliding 5.1% and 5.6%, respectively; Nasdaq compounded losses close just shy of 7% in 2 days (June 9-10) ECB plans to stop its bond-buying program to cool record-high inflation (8.1% reading in May). The gap between Italian and German 10-year bond yields hit 227bps, the highest since May 2020 At a security summit in Singapore, China’s defense minister Wei Fenghe accused the U.S. of interfering in Chinese internal affairs and confirmed that annexation of the “China’s Taiwan” is a historic mission Fuel prices in U.S. hit 40-years max and keep rising while shale production remains sluggish to heed calls to hike volumes Blockchain assets collapsed under U.S. inflation data and EU monetary policy. On June 13, BTC entered USD 25k area (18-month low), ETH plunged to 13-months low, and all Layer-1 altcoins lost about 20% value during the weekend in a sector-wide rout PROFZERO'S TAKE As anticipated on our June 8 Parlay, there are still significant pockets of volatility on the market to call the bottom. In particular, we reiterated that the uncertainty that then permeated the ECB monetary policy could disrupt the feeble sidelining trade engaged by equities in the previous weeks - and so it happened. ProfZero does not share the surprise of many operators - neither for U.S. inflation at 8.6%, nor for ECB potentially raising interest rates by 50bps in September. Instead, it may now be the time to appreciate greater clarity from the regulatory side; definitely not a Buy signal, but a better environment to express investment strategies Rout in blockchain assets called by ProfZero as early as May 11 - and potential for more falls. No time to play PROFONE'S TAKE On June 9, along with the 25bps interest rate hike scheduled for July, the ECB declared the end of bond-buying era ("whatever it takes", anyone?), thus intensifying the pressure on Southern European countries (Italy, Greece, Spain, Portugal) by sending their prospective borrowing costs higher. The gap between the Italian and German 10-year bond yields (considered as benchmark of eurozone market stress) reached 227bps, the highest level since May 2020, confirming the general market trend of investors avoiding risk assets in favor of safe havens. ProfOne argues Christine Lagarde's calls to avoid “fragmentation” in the continent's monetary policy is shaky, at best. For on one side it’s inherently contradictory to prevent non-homogeneity among the economies inside of EU, while on the other pursuing "selective quantitative tightening" would disparage the safety net around the continent's most virtuous economies. In yet another head-scratcher for traders, the debt crisis of November 2011-July 2012 looks set to resurface PROFTHREE'S TAKE Following ProfOne’s comments on the metals of the future, ProfThree has a lot to say on copper which is considered the key component on the road towards de-carbonisation. A recent 18% y-o-y plunge in copper exports from Chile (the world's largest producer) in May spooked traders given an already undersupplied market, judging by the critically low level of stocks at both LME and SHFE. In the fundamentals equation, ProfThree sees supply as fixed, since there is zero greenfield projects coming online for the foreseeable future, while those under discussion or development are mainly located in risky jurisdictions (Chile, Peru, Congo), putting even future supply under threat. At the same time, on the demand side there is ever growing demand from EV makers, as well as solar and wind mills producers. With that in mind, Profs are in full agreement about copper joining semiconductors and battery minerals (cobalt, nickel, lithium) in the list of the commodities of the future - each remarkable tainted by yet new supply-chain uncertainties
CME:BTC1!
by ProfZero
Things ProfZero doesn't like - Increasing correlationsINVESTMENT CONTEXT On June 9, the ECB governing council announced its intention to raise interest rates by 25bps in July; a "larger increment", possibly sized at 50bps, is envisaged for September if inflation persists For the third time this year the World Bank cut its economic growth forecast for 2022, this time to 2.9%, after January and April revisions to 4.1% and 3.2% respectively, and warned about coming years of above-average inflation and possibly stagflation The OECD slashed its global growth forecast to 3% - down from 4.5% it predicted only a few months ago U.S. inflation in May unexpectedly hit 40-year high at 8.6%, up from April's reading at 8.3% considerably adding pressures to the Fed Freeport LNG terminal in Texas, crucial for energy supplies to Europe, will be closed for at least three weeks following an explosion at its Texas Gulf Coast facility Mortgage demand is at the lowest level in 22 years in front of rising rates PROFZERO'S TAKE Equities cratered on June 9 and 10, as investors processed the combined news of the ECB announcing its path to increase interest rates and surprisingly surging inflation in the U.S. Albeit money-market traders already priced in the ECB 25bps hike scheduled for July, now they are factoring a 40% probability of a heftier 50bps raise for September - one that would bring interest rates into positive territory almost 2 quarters ahead of forecasts after 8 years of ultra-loose monetary policy. ProfZero largely anticipated that markets didn't fully bake-in the ECB's course on monetary policy; now that that pocket of volatility has been uncovered, ProfZero sees turmoil on equity markets as the positions that were constructed in an attempt to call the bottom are unwound; yet with more clarity on the Regulation's side, now investors can rely on a more detailed strategic frame ProfZero does not like swelling correlations. They signal generalized distress amongst traders, with algorithms amplifying the sentiment. Seeing the blockchain space fall along with the market at large while BTC comes at the closing point of a mid-term triangle indicates a possibly painful breakout may be in the making PROFONE'S TAKE After the bank cut again its world economic growth forecast for 2022, World Bank's President David Malpass said “The world economy is again in danger”. According to the OECD, the world economy will pay a "hefty price" for the war in Ukraine. The macroeconomic scenario is not homogeneous, and emerging market economies are expected to bear the brunt of the worsening conditions. Some signs of relief are appearing instead in developed countries, thanks to small price declines for semiconductors and fertilizers. ProfOne reminds that June is the peak period for energy supplies to be stocked ahead of winter in the northern hemisphere, while freight rates are expected to be kept high by persistent port congestion and intensifying deliveries for goods to be dispatched ahead of holiday season. Under such premises, Profs see but scant possibilities for near-term solution to the inflation equation, left alone the possibility of a "soft landing" for the economy deeper in 2022 PROFTHREE'S TAKE Mixed news coming from China - trade data showed exports bounced back in May, growing at 16.9% on a yearly basis, while also imports rose to 4.1% after both indicators had hit the floor in April amidst COVID-related restrictions. Yet, albeit trade figures beat expectations, investors somewhat shifted their attention to a new lockdown in one district of Shanghai, which capped the gains in Asian markets. ProfThree has set its eyes on the containment of COVID in Inner Mongolia, China’s key coal mining province, which now accounts for almost a half of total Omicron cases in the country. With coal supply and the related logistics under strain, prices might surge even higher, compounding to global energy supply and security concerns
CME:BTC1!
by ProfZero
ECB raises key rate by 25 basis points in JulyEUR/USD ⬇️ GBP/USD ⬇️ AUD/USD ⬇️ USD/CAD ⬆️ XAU ⬇️ WTI ⬇️ The European Central Bank (ECB) finally relents, and prepares to increase the key interest rate by 25 basis points in July, while other interest rate categories remain unchanged. In its statement, the ECB claims “conditions have been satisfied” for a rate hike and net asset purchases will cease as means to tighten the monetary policy. In response to this update, EUR/USD dipped from 1.0760, stabilized at 1.0620 with a closing price of 1.0614. While the ECB decision is less aggressive than the Federal Reserve and Reserve Bank of Australia, the ECB is expected to raise the key interest rate again in September. Greenback also rallied against other major currencies, GBP/USD dipped from 1.2552 to 1.249. New lockdown measures were imposed in Shanghai and Beijing to meet China’s zero-case policy target, both Australian currency and economy were dampened, AUD/USD declined to 0.7097, after trading flat at 0.7095. USD/CAD climbed and plateaued at 1.270 level to close at 1.2696, as Canada’s Net Change in Employment is expected to have a 30,000 increase - a double over last month’s growth of 15,200. A strong dollar and higher US treasury yields have gold futures prices subdued, spot gold briefly fell to 1,842 per ounce but quickly recovered to 1,852.8. The downsizing of several US refineries did not deter the oil bulls, crude oil went down to 121.51 a barrel, now on its way back to 120. Later tonight (10 June), forecasts have projected a 0.5% increase in US Core Consumer Price Index (CPI), and general CPI going even higher with oil prices soaring. More market information on Mitrade website.
NASDAQ:XAU
by Mitrade_official
EUR/USD Under Pressure After ECB, U.S. Inflation Data EyedThe EUR/USD pair is losing ground on Thursday, following the European Central Bank monetary policy announcement. After hitting a nine-day high of 1.0773, the EUR/USD turned lower and dropped to its lowest in over two weeks at 1.0615 as investors assess the ECB outcome. The ECB announced the end of its monetary stimulus program at the beginning of July and hinted at a 25 basis points rate hike for next month. While many were expecting a nod to a more aggressive 50 bps increase move, the bank also painted a grim economic outlook, triggering risk aversion across the board. President Christine Lagarde suggested that the economic outlook has worsened, as near-term activity is expected to be negatively affected by higher energy costs, while price increases have spread across other sectors and risks remain tilted to the upside. During Lagarde’s press conference, the euro came under pressure even as German 10-year bond yields hit fresh multi-year highs at 1.47%. Despite US 10-year yields staying above 3.0%, the US-DE 10-year spread fell to its lowest level since July 2021 of 160 bps but provided no relief to the shared currency. On Friday, the U.S. will release May’s Consumer Price Index, which is expected to show that prices grew at an annualized pace of 8.3%, supporting the view that the Fed is headed to more rate increases. From a technical perspective, the EUR/USD short-term outlook has turned slightly bearish according to the daily chart. The price has dipped below the 20-day SMA while the RSI has crossed its midline upside-down and the MACD continues to point at dwindling buying interest. Still, the pair has managed to hold above the 1.0600 level so far. A break below could increase the bearish pressure. Next supports are seen at 1.0532, May 20 low, 1.0500 and the previous swing low at 1.0470. On the other hand, the EUR/USD needs to regain the 1.0700 level to improve the short-term perspective, with 1.0770 and 1.0850 as next bullish targets.
by Alex_Boltyan_FXAnalyst