EUR/USD Technical Analysis: Fateful Trading Week

By the end of last week’s trading, the bulls succeeded in pushing the EUR/USD currency pair, with gains, towards the 1.0788 resistance level, before closing trading around 1.0749. The general trend is still bearish, and stability below the support 1.0800 confirms that. This performance awaits an important and fateful trading week.

Federal Reserve policymakers are about to take their first break from the 15-month-old campaign to raise interest rates, even as they grapple with a resilient US economy and persistent inflation. All in all, the FOMC next Wednesday is expected to maintain the benchmark lending rate at a range of 5%-5.25%, the first skip after 10 consecutive increases dating back to March of last year. While officials’ efforts have helped reduce price pressures in the US economy, inflation remains well above their target.

Investors’ focus will be on the Fed’s quarterly point chart in its Summary Economic Outlook, which is expected to show its benchmark policy rate at 5.1% at the end of 2023.

In contrast, markets are pinpointing the likelihood of a quarter-point rise in July followed by a cut of similar size by December, and some Fed policymakers have emphasized that the pause in the tightening cycle should not be seen as the final increase. Fed Chairman Jerome Powell, who will hold a press conference after the meeting, suggested he would prefer a break from tightening to assess the impact of both past moves and the recent bank failure on credit conditions and the economy. His comment will be scrutinized for hints about the committee’s plans at its next meeting next month.

Fed officials will have fresh US consumer price data when they start monetary policy deliberations on Tuesday. While central bankers are targeting a separate measure of inflation for their 2% target, the closely watched CPI report is expected to show underlying price pressures that remain strong. The core gauge, which excludes volatile food and energy prices, is expected to have increased 0.4% from the previous month. That would mark the sixth month in a row that core inflation has increased by this amount or more and helps explain why interest rates have continued to rise for longer.

Monthly developments of this magnitude made it difficult for core inflation to subside quickly. On a yearly basis, core CPI is expected to increase by 5.2%, the slowest pace since November 2021. Overall CPI is expected to decline to 4.1%. While inflation remains uncomfortably high, gradually moderate inflation provides some space for the central bank to pause.

Wednesday’s report is expected to show more US inflation at the producer level, with a core gauge seen rising at the slowest annual pace in more than two years as commodity costs continue to flatten. May Retail Sales is one of the most important US economic data this week. It is possible that the value of purchases changed little during the month, consistent with the decrease in consumer demand for goods.

• Despite the recent rebound attempts, the general trend of the EUR/USD currency pair is still bearish.
• According to the performance on the daily chart, the trend will not reverse without moving towards the psychological resistance level of 1.1000 again.
• It may happen if US data and Federal Reserve plans are less stringent, allowing the euro to recover.
• On the contrary, the US dollar may find momentum to move strongly downwards, and currently the closest support levels for the euro / dollar are 1.0720 and 1.0600, respectively.
• Performance may remain in a narrow range until the reaction to the above events.

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