EUR/USD preserves daily gains near 1.12, virtually flat on the week
Following a drop toward the bottom of its one-month-old trading range at 1.1130 on Thursday, the EUR/USD pair took advantage of the USD sell-off in the first half of the NA session on Friday and recovered its losses. As of writing, the pair is trading at 1.1195, up 0.43% on the day.
After the University of Michigan Consumer Sentiment Index had fallen to its lowest level at 94.5 since Donald Trump took office, the US Dollar Index erased the majority of its FOMC-led gains and eased to 97.10, allowing the pair to make a mild correction. At the moment, the DXY is losing 0.37% on the day, at 97.15. Although a couple of FOMC members gave some dovish comments in the second half of the session, the index didn't give any reaction.
- UoM: Early June drop of 2.6 points in Sentiment Index masks much larger decline since June 8th
- Fed's Kashkari: Fed should have waited to raise rates until inflation strengthened
- Fed's Kaplan: Want to see more evidence of stronger inflation before hiking rates again
Regardless of the relatively high volatility witnessed in the pair in the second half of the week, EUR/USD is headed for a flat close on a weekly basis suggesting that the pair continues to struggle to determine its next direction. Today's data from the EU showed that the CPI in the euro area contracted 0.1% on a monthly basis in May and remained unchanged at 1.4% on a yearly basis, matching the market consensus, and failed to provide any fresh impetus for the euro.
Technical outlook
FXStreet analyst Valeria Bednarik explains that in the weekly chart, technical indicators are retreating from overbought territory, but still far above their midlines and with the 20 SMA having extended its advance well below the current level, reflecting the absence of selling interest, despite the inability to surpass the critical 1.1300 figure.
Key quotes
"Big charts are lacking directional signs, which means that at this point, is only about breaking critical levels, in the hopes the rally will continue either side of the board. In the meantime, playing the range intraday is the name of the game."
"Beyond 1.1300, the pair has room to extend its advance towards the 1.1360/80 region, while beyond this last, the 1.1460 price zone comes next. The 1.1460 mark is a line in the sand, as the pair has been unable to sustain gains beyond it since January 2015. Intermediate supports come at 1.1160 and 1.1110, where the pair bottomed multiple times over these last four weeks. It would take a break below 1.1075, the low set on May 18th, to confirm a steeper decline, with scope then to test the 1.1000 figure."
EUR/USD forecasts from banks:
- EUR/USD potential drop to 1.1105 – UOB
- EUR/USD further downside pressure expected – Commerzbank
- EUR/USD could slip back to 1.10 and below – Danske Bank
- EUR: Solid growth trends and continuing positive politics - Westpac