Over the past few days, a lot of news has been published regarding the macroeconomic and political situation of both the Euro Area and the United States, inducing strong volatility in the currency pair and the breakout of the consolidation period that began in mid-June. In fact, expectations have increased regarding the number of interest rate cuts by the Federal Reserve, while the euro has strengthened on the basis of the results of the French general elections.
- Last week the US dollar euro exchange rate slipped slightly upwards by +0.19%, ending the week slightly above the 1.07 dollar per euro level.
- According to EUR/USD forecast, after a successful breakout above the $1,085 level per euro, some macroeconomic data has strongly impacted the value of the dollar causing the start of the collapse, which was then subsequently accelerated by the first cut of the ECB and the geopolitical instability in Europe. This collapse made the currency pair slide below the support level at $1,075 per euro where the pair consolidated for two weeks before making a breakout to the upside.
- During this week the Euro Area will publish its inflation rate while in the United States Jerome Powell will hold a press conference and the Fed Minutes of the latest FOMC Meeting will be published, which could provide important news regarding the next possible steps of the American monetary policy. Keep up to date on the latest news from the best Italian brokers today.
The American Market Starts to Price More than a Cut During 2024
Last Friday the United States published its data relating to the inflation rate measured by the Personal Consumption Expenditures (PCE) indicator, the measure preferred by US Federal Reserve officials. Inflation reported its first reduction since December with inflation and core inflation reaching 2.6% from 2.7% and 2.8% respectively.
This first reduction in the inflation rate has provided the confidence for the market to once again start pricing in two interest rate cuts with the first most likely during the September session although some analysts argue that there may be a low chance of a first cut will already be implemented during the meeting on July 31st after the Feds have consulted the next data on the labor market and CPI inflation.
During this period of devaluation of the US dollar, the euro appreciated strongly following the results of the French elections which saw Marine Le Pen’s right-wing Rassemblement National (RN) party reach 33.5%. The markets’ optimism, however, appears to derive from the fact that it would appear to be highly unlikely that RN will be able to reach an absolute majority, reducing the government’s ease of approving all their legislative proposals.
EUR/USD Breaks Out to the Upside After Two Weeks of Consolidation
From today’s Forex analysis, after the rapid collapse induced by the ECB’s first cut and the instability generated by the European elections, the exchange rate of the euro-American dollar currency pair had reached the level of 1,068 dollars per euro, close to which it consolidated throughout the second half of June.
Despite this, thanks to the very important macroeconomic factors we discussed, Monday’s session opened with a very strong upward jump at the opening and a rally firmly above the previous resistance level at 1,075 dollars per euro.
Furthermore, this bullish breakout was already heralded by the divergences that were formed by the RSI and EFI indicators, both of which had started to show a steady increase in strength and trading volume during the consolidation period where the pair’s exchange rate continued to move sideways. Finally, between Friday and Monday the currency pair made an upward crossover on the MACD indicator, which signals a resumption of the bullish trend in the medium term. You can trade our forecasts today with the best Italian forex brokers chosen for you by DailyForex.
Euro US Dollar Weekly Outlook
- Current resistance level: $1,080 per euro, although before it can reach this level the currency pair would need to cross the 50, 100 and 200 day moving averages, which usually provide a strong resistance level.
- Current support level: $1.07428 per euro, the previous support level that contained the consolidation period that occurred during the second half of June.
- Upside target: 1,080 dollars per euro.
- Downside target: 1.0628 dollars per euro.
Considering recent macroeconomic events and Monday’s rapid push, the most likely near-term scenario for the currency pair appears to be a period of consolidation above the support level at $1,075 per euro while waiting for the upside target to be reached at 1.08 dollars per euro above the resistance imposed by the moving averages.
On the other hand, EUR/USD movements will be extremely volatile this week due to Jerome Powell’s conference on Tuesday afternoon and the publication of the FOMC Minutes on Wednesday evening.
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