EUR/USD Extends Losses as Cautious Mood Prevails Ahead of ECB and Fed Decisions

The EUR/USD pair continues to decline, reaching a new intraday low near 1.0750, as it retraces its first weekly gain in five.

Arslan Butt•Monday, June 12, 2023•2 min read

The EUR/USD pair continues to decline, reaching a new intraday low near 1.0750, as it retraces its first weekly gain in five. Market sentiment remains cautious as investors brace for key monetary policy decisions from the European Central Bank (ECB) and the US Federal Reserve (Fed). The Euro pair is weighed down not only by pre-event anxiety but also by challenges to sentiment and a reassessment of previous expectations regarding the ECB and Fed’s next moves. Meanwhile, the US Dollar Index (DXY) has declined in the past two weeks, falling to 103.56 most recently. Despite economic concerns, downbeat US activity data for May, coupled with disappointing employment indicators, have weighed on the US Dollar. The recent surge in United States Initial Jobless Claims and softer outcomes in US ISM Services PMI, S&P Global PMIs, and Factory Orders have pushed back Fed hawks, increasing expectations of no change in interest rates during the Fed’s upcoming policy meeting.

On the other hand, the Eurozone and Germany have also experienced lackluster growth numbers and final readings of inflation indicators, casting doubts on the ECB policymakers’ hawkish bias. Concerns about the economic slowdown in Europe have surfaced following recent downbeat statistics, suggesting that the ECB may not be able to proceed with a 0.25% rate hike this week.

Furthermore, inflation data from Germany and the US will be closely watched by EUR/USD traders, as higher numbers could keep policy hawks optimistic. However, fears of a slower economic transition on a broader scale, along with concerns over US-China tensions and rising yields, continue to impact EUR/USD traders. Wall Street and yields closed higher, but the market sentiment remains divided as the crucial week begins.

In terms of technical analysis, the EUR/USD pair has started the day with a clear negative bias, breaking the intraday bullish trend line and targeting a decline towards the initial target of 1.0745. Traders should monitor the price when it reaches this level, as a break below it could extend the bearish wave towards the 1.0630 area. The bearish bias is supported by the pair moving below the EMA50, but a breach of 1.0870 would negate the negative scenario and indicate a resumption of the main bullish wave.

The expected trading range for today is between the support level of 1.0730 and the resistance level of 1.0875.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.