EUR/USD Faces Resistance as Traders Remain Cautious amid Key Week

Posted Monday, July 3, 2023 by
Arslan Butt • 2 min read

[[EUR/USD]] struggles to defend previous weekly, monthly, and quarterly gains as it hovers around the 1.0910-1.0915 level in early Monday trading. The Euro pair is reevaluating recent buyer optimism ahead of top-tier data and events from the US, introducing a note of caution for traders at the start of the week.

The US Federal Reserve’s preferred inflation gauge revealed the smallest yearly gain in six months, dampening hawkish expectations for the central bank. The absence of major hawkish comments from Fed officials further boosted EUR/USD bulls. However, the currency pair closed the previous week, month, and quarter on a positive note.

Meanwhile, the US Personal Consumption Expenditure (PCE) Price Index for May came in slightly below market expectations, while the preliminary Eurozone HICP data showed a modest increase month-on-month but a slight easing in yearly figures. The European Central Bank’s attempt to defend its rate hike bias faces challenges due to softer inflation data and concerns about Germany’s recession.

EUR/USD traders may encounter difficulties in extending the recent recovery if this week’s Federal Open Market Committee (FOMC) Monetary Policy Meeting Minutes and the US jobs report present upbeat signals. Intraday traders will find today’s final readings of Germany and Eurozone HCOB PMIs for June, along with the US ISM Manufacturing PMI for the same month, of interest.

From a technical perspective, EUR/USD shows signs of consolidation as it retraces from a convergence of the 50-SMA and a two-week descending resistance line. The presence of bullish MACD signals and a stable RSI (14) counterbalances the pair’s retreat, suggesting a potential intraday decline towards an ascending support line from May 31 around 1.0860. However, further downside is likely to be limited by recent lows near 1.0835 and the 200-SMA level around 1.0815.

On the upside, a break above the resistance confluence at 1.0920, which includes the 50-SMA and an immediate descending trend line, could set the stage for a challenge to the monthly high near 1.1015.
Overall, unless the 1.0815 support levels are breached, EUR/USD buyers are expected to maintain control, although some short-term downside may be anticipated.

Additionally, intraday traders will be monitoring the final readings of Germany and Eurozone HCOB PMIs for June, as well as the US ISM Manufacturing PMI for the same month.

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