EUR/USD Volatility Prevails Amid Anticipated Fed Chair Speech and Mixed Economic Indicators

The EUR/USD pair is currently fluctuating around 1.0950 during the Asian session, reflecting the market’s uncertainty as investors eagerly anticipate further interest rate insights from Federal Reserve (Fed) chair Jerome Powell’s speech.S&P500 futures are recording slight losses in Asia, despite US equities remaining bullish on Tuesday, bolstered by stronger-than-expected United States Durable Goods Orders. A surge in demand for Durables suggests potential recovery in the somewhat lagging manufacturing sector.

According to the US Census Bureau, Durable Goods Orders saw a 1.7% expansion, defying expectations of a 1% contraction. May’s Durables data exceeded April’s figure of 1.2%, with Durables data, excluding defense orders, expanding by 3.0% against stagnant performance expectations.

The US Dollar Index (DXY) seeks to extend its recovery above 102.62, supported by resilient US Durables data and increased likelihood of a policy-tightening restart by the Fed. According to the CME Fedwatch tool, there is a roughly 77% probability of a 25 basis point interest rate hike to 5.25-5.50%.

In contrast, the Euro experienced significant activity on Tuesday following a hawkish speech by European Central Bank (ECB) President Christine Lagarde at the ECB forum of Central Banking. Lagarde acknowledged extremely high inflation in the Eurozone and emphasized the need for sufficiently restrictive monetary policies to curb price pressures. She further noted the recent amplification of inflation effects due to rising wages.

Meanwhile, concerns about a deepened recession in the German economy are mounting as business morale has declined for the second consecutive month. The Ifo Institute reported a drop in the business climate index from 91.5 in May to 88.5 in June.

It’s also crucial for investors to note that the German economy has already entered a technical recession, as evidenced by a consecutive contraction in Gross Domestic Product (GDP) figures for two quarters.

EUR/USD Technical Outlook

The EUR/USD pair has decisively surpassed the 1.0940 mark and maintained its close above this level on the daily candlestick, bolstering the anticipated continuation of the bullish trend in the forthcoming sessions. This opens the path towards the next positive target at 1.1075.

Consequently, we maintain our bullish outlook for the EUR/USD pair on both intraday and short-term scales, influenced by the recently completed inverted head and shoulders pattern. It’s important to note that any breach below 1.0940 could subject the price to negative pressure, potentially driving it to test the 1.0860 area before attempting another rise.

The projected trading range for today is expected to be between 1.0880 as the support level and 1.1040 as the resistance level.