The Euro (EUR) starts the week by rebounding from earlier lows, providing support for EUR/USD to regain the 1.0900 level and beyond as trading in Europe concludes on Monday.
Simultaneously, the US Dollar (USD) retraces part of its earlier gains and retreats below the 103.00 level as reflected in the USD Index (DXY). This occurs against the backdrop of decreasing US yields across the yield curve, an increase in risk appetite, and anticipation of the upcoming Independence Day holiday on Tuesday.
Ongoing discussions revolve around the potential future actions of the Federal Reserve and the European Central Bank (ECB) regarding the normalization of their monetary policies. Speculation about an economic slowdown on both sides of the Atlantic fuels this debate. Currently, there is a strong belief that both central banks will raise rates by 25 basis points at their meetings in July.
Joachim Nagel, a board member of the ECB, stated during the session that there is still progress to be made in tightening monetary policy, and the inflation outlook is primarily influenced by upward risks. Nagel emphasized that the signals from monetary policy clearly indicate further tightening.
According to the latest CFTC Positioning Report, net long positions in EUR remained steady and reached a two-week high of approximately 145,000 contracts in the week ending June 27. This occurred despite the spot rate reaching new monthly highs above 1.1000, which eventually reversed due to a recovery in risk-off sentiment and increased interest in the USD.
In the United States, the final S&P Global Manufacturing PMI for June came in at 46.3, while Construction Spending increased by 0.9% monthly in May. However, the ISM Manufacturing PMI for June fell short of estimates, recording a value of 46.0.
EUR/USD rebounds from earlier lows and strives to strengthen its position above the 1.0900 level. Nevertheless, the next obstacle is anticipated at the June peak of 1.1012 (June 22) before reaching the 2023 high of 1.1095 (April 26).
These levels are closely followed by the round number of 1.1100. Further north, the weekly high of 1.1184 (March 31, 2022) emerges, supported by the 200-week SMA at 1.1181, with another round number at 1.1200.
On the downside, a breach of the weekly low at 1.0835 (June 30) could open the door to a test of the interim 100-day SMA at 1.0819. Should the latter be broken, the next significant support zone would likely be the May low of 1.0635 (May 31), followed by the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).
The positive outlook for EUR/USD remains unchanged as long as the pair remains above the critical 200-day SMA, which is currently situated at 1.0595.
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