The European currency (EUR) has found some traction, prompting. The EURUSD pair to ignore two consecutive daily drops. And resume its recent higher trend on Tuesday’s turnaround.
This better sentiment towards risky assets can be linked in part to the People’s Bank of China’s (PBoC) recent decision to reduce its 1-year medium-term lending facility (MLF) by 10 basis points (bps), with the goal of supporting the Chinese economy as it recovers from the pandemic.
Investors are keeping a tight eye on future interest rate decisions by the Federal Reserve and the European Central Bank (ECB), both of which are likely to begin their rate hike campaigns in July.
Furthermore in Germany, producer prices fell 1.4% month on month but grew 1.0% year on year in May, while current account and construction output figures will be announced in the coming weeks. Before statements by ECB Board members E. McCaul and L. De Guindos, Euroland was expanded.
The housing sector will be the primary emphasis in the United States, with talks from St. Louis Fed member J. Bullard (a hawkish 2025 voter) and New York Fed member J. Williams (a moderate permanent voter) also on the schedule.
Market movers for the day: EURUSD bulls reclaim control of the sentiment
The US currency is under pressure as market optimism returns.
To help the current weak economic recovery, the PBoC lowers the 1-year medium-term lending facility (MLF).
The testimony of Federal Reserve Chairman J. Powell will be the key events to watch later this week.
Moreover currently, the key factor impacting the currency pair’s price movement is the gap in the policies of the ECB and the Fed.
Technical Outlook
The EURUSD has retreated somewhat from its recent monthly high of 1.0970, which was hit on June 16. To maintain its upward momentum, the EUR must swiftly overcome this level, potentially reaching the psychological barrier of 1.1000. Further resistance levels include the 1.1095 (April 26) 2023 high, the 1.1100 round level, and the 1.1184 (March 31, 2022) weekly high, which is supported by the 200-week SMA, which is currently at 1.1181.
Moreover if the bears seize control, there is an intermediate conflict at the 55-day SMA of 1.0881. If this level is broken, there are no substantial support levels until the low in May of 1.0635 (May 31), followed by 1.0516 (March 15) and 1.0481 (January 6), respectively.
