EUR/USD ended a week where it essentially started trading five days ago as conditions were choppy and financial institutions considered their options.
The EUR/USD entered the weekend close to the 1.09100 ratios and ended the week trading near the values it started at the beginning of last week. Technical trading actually has some fairly strong upside in the near term as financial institutions likely view global central banks as having the same dilemma regarding inflation and the potential for further interest rate hikes. European economic data delivered better-than-expected German CPI statistics last week.
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EUR/USD mirrored other major Forex pairs tied against the USD. EUR/USD strengthened at the start of the week, reaching a high near 1.09775 on Tuesday. Only to start getting pushed back and then hit a low around 1.08340 on Friday before pulling back above the 1.09000 level before the weekend. Somewhat unsettled conditions in EUR/USD could be viewed positively by day traders who like to bet on quick moves. However, the somewhat bumpy values shown also mean that solid risk management is needed to avoid moves that go against the chosen direction.
Many U.S. financial institutions are expected to be quiet on Monday, and for the Independence Day holiday on the 4th.Thursday traders should prepare for the potential of rather flat market conditions in July. However, the absence of US traders could also open the door to sudden volatility if the Forex market is not ready for large orders. The 1.09000 level should be watched as an important support level at the start of the week.
The ability to hold EUR/USD after last week’s close may be interpreted somewhat bullishly by some speculators. While the European Central Bank has certainly expressed an aggressive stance on raising interest rates, the US Federal Reserve may also find it has to maintain its hawkish rhetoric and back it up with a rate hike in late July. However, this creates a balance, perhaps too much, when it comes to views.
- Better-than-expected US GDP numbers sent EUR/USD momentarily to new lows not seen since mid-June last Thursday.
- That’s as traders interpreted the better-than-expected growth numbers as a reason why the US Fed will need to raise the federal funds rate again.
- Important manufacturing PMI data from Europe coming tomorrow, German and French results to watch.
- While recession data from the EU is biting, EU inflation statistics unfortunately remain problematic to pave the way for further rate hikes by the ECB.
Speculative price range for EUR/USD is 1.08640 to 1.10110
Choppy trading in EUR/USD should be expected early this week with lighter than normal trading. Conditions in the near term may remain a little nervous considering the US Fed will release the minutes of the FOMC meeting on Wednesday and the US jobs numbers will be released on Friday. If the Fed’s report indicates they are sincere about another rate hike coming in July and later this year, it would be a policy confirmation that may have already been factored into EUR/USD.
The 1.09000 level is important and if it proves durable, it may find itself attracting speculative buying if the value can be sustained higher. While EUR/USD has been pushed back from Tuesday’s highs, the notion that EUR/USD remains slightly oversold may still exist with financial institutions still targeting the 1.09500-1.09900 area. The US data at the end of this week will be important. Inflation results from next Friday’s US average hourly earnings data will be critical, if the result meets expectations, behavioral sentiment may remain calm, which may be good for EUR/USD buyers.