EUR/USD is under pressure around 1.0700, trimming losses in the European session. The pair is weighed down by broad US Dollar demand amid a hawkish Fed outlook and renewed worries over the US debt deal. EU/ US sentiment data awaited.
The EUR/USD continues to move with a bearish bias. However, a positive development for the Euro is that it has held above 1.0700. Technical indicators in the daily chart are at extreme oversold readings, pointing to some potential consolidation ahead. The short-term negative outlook could change if the Euro retakes the 20-day Simple Moving Average (SMA), currently at 1.0880.
On the 4-hour chart, the EUR/USD remains in a downward channel. A break above 1.0740 could trigger an extension of the Euro’s recovery, targeting initially 1.0760, ahead of the strong resistance area of 1.0800. On the downside, under 1.0700, an acceleration could take place, targeting the 1.0660 zone.
The EUR/USD held above last week’s lows but posted another daily loss and the lowest close since March 17. The pair was able to hold above 1.0700 and also avoided hitting new monthly lows. The Euro weakened during the European session and turned negative across the board, dropping versus the pound.
The Euro lagged among majors on Monday, unable to break a negative streak versus the US Dollar. On Tuesday, Spain will release the preliminary report of May’s Consumer Price Index (CPI), the first glimpse of price behavior during the current month. This is a key data for European Central Bank (ECB) officials and market expectations.
The Greenback posted mixed results on Monday, affected by the improvement in risk sentiment. The DXY gained less than 0.1%, enough to post the highest close in two months above 104.20. As expectations move from a pause at the next FOMC meeting to a 25-basis-point increase, any decline of the US Dollar will likely be limited.
US markets were closed due to Memorial Day, and as a result, it was an even quieter Monday. Market participants digested the weekend’s agreement in Washington to suspend the debt limit. However, legislation needs Congress’s approval, so the situation still needs attention. Investors also analyzed Friday’s US consumer inflation ahead of a busy week in terms of economic data. On Tuesday, the US will report housing data and consumer confidence. Key reports later in the week include Thursday’s ADP employment report and Friday’s Nonfarm Payrolls.
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