EUR/USD Faces Selling Pressure as Eurozone Economic Concerns Mount

Posted Wednesday, June 7, 2023 by
Arslan Butt • 1 min read

The EUR/USD pair encountered strong resistance around 1.0700 during the early European session, leading to selling interest. The pair is currently defending the crucial support level of 1.0670, and a breakdown below this level could trigger a broader bearish movement. The Euro has been under pressure as investors anticipate a gloomy economic outlook in the Eurozone.

US equities closed positively on Tuesday, supported by more dovish catalysts impacting the Federal Reserve’s interest rate policy. The US Dollar Index (DXY) has rebounded to around 104.18, although it remains in uncertain territory due to the lack of significant economic events this week.

The demand for US government bonds has increased as the likelihood of a stable interest rate policy rises. According to the CME FedWatch tool, there is over an 80% chance of rates remaining unchanged. This has led to a decline in 10-year US Treasury yields to approximately 3.66%.

The German economy is facing challenges, primarily due to the European Central Bank’s higher interest rates. Germany has already experienced a recession with consecutive quarterly contractions in Gross Domestic Product (GDP). Additionally, German Factory orders are consistently declining, indicating weak demand.

Eurozone Retail Sales data released on Tuesday fell short of expectations. Monthly Retail Sales remained stagnant, while the market anticipated a 0.2% expansion. Annual Retail Sales contracted by 2.6% compared to the projected -1.8%. Despite the challenging economic outlook, ECB President Christine Lagarde is likely to continue raising interest rates, driven by persistent core inflation.

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