EUR/USD Consolidates as Pre-Data Anxiety Prevails – Technical Outlook Indicates Bearish Trend

Posted Thursday, June 1, 2023 by
Arslan Butt • 2 min read

The EUR/USD pair exhibits a sense of pre-data anxiety, hovering around 1.0690 in the early morning hours in Europe. Despite the market’s risk-on sentiment and diminishing expectations of a hawkish Federal Reserve, the Euro pair fails to find momentum. Germany’s inflation data showed a decline, with Consumer Price Index (CPI) slipping to 6.1% YoY in May. The European Central Bank’s preferred inflation gauge, the Harmonised Index of Consumer Prices (HICP), also eased to 6.3% YoY during the same period. Comments from ECB officials diverged, with Vice President Luis de Guindos stating that victory over inflation is not yet achieved, while ECB policymaker Madis Muller sees no signs of slowing in Core inflation and expects multiple rate hikes.

In the US, JOLTS Job Openings exceeded expectations, while the Chicago Purchasing Managers’ Index dropped. Mixed US data and comments from Fed speakers cast doubt on the central bank’s ability to further raise rates, leading to suggestions that the Federal Open Market Committee (FOMC) may hold interest rates steady in June. The passing of the debt-ceiling bill by the US House of Representatives instilled optimism in the market, putting downside pressure on the US Dollar and supporting the EUR/USD price.

Upcoming data to monitor includes Eurozone CPI and HICP for May, which have already impacted ECB hawks. Additionally, US data such as ADP Employment Change, ISM Manufacturing PMI, and S&P Global PMIs for May will provide fresh market impulses. The voting on the debt-ceiling bill in the US Senate and ECB President Christine Lagarde’s speech will be crucial, as EUR/USD buyers show strength while US Dollar bulls remain hesitant.

EUR/USD Technical Outlook

The EUR/USD pair has successfully broken above the resistance of the bearish channel and is now trading above it. This upward movement indicates a potential test of the key resistance level at 1.0730. It’s worth noting that the EMA50 intersects with this resistance, providing additional strength. However, the stochastic indicator is showing signs of losing positive momentum.

Considering these factors, we suggest an overall bearish trend. The initial target is to break below 1.0650, which would pave the way for further downward movement towards the next support level at 1.0520. It’s important to mention that if the price manages to breach above 1.0730, it would invalidate the expected decline and potentially trigger a bullish reversal.

For today’s trading range, we anticipate support around 1.0590 and resistance around 1.0750.

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