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Dollar starts busy week on front-footThe US dollar will be tested this week with the release of some top-tier data in the coming days. We will have the closely-followed ISM services PMI on Thursday, followed by the June nonfarm payrolls report, while the latest CPI report will be published next week. Together, these data releases should be the deciding factor behind a hike or hold in US interest rates later this month. For now, the USD remains on the front-foot and barring any big downside surprises in US data, the greenback might be able to gains further ground in the short-term outlook. All eyes on US data It has been a quiet week in FX markets so far, but thankfully US markets will reopen today, and volatility should pick up as a result. The focus will be on FOMC meeting minutes, although they are unlikely to tell us anything different to what we have already heard from several Fed officials that have spoken since their meeting in June. More important for the dollar will be incoming data. Unfortunately, there are not many macro pointers scheduled for release today, with factory orders being the exception. We will have ISM services PMI and ADP employment data on Thursday to look forward to, before the focus turns to the nonfarm jobs report on Friday. FOMC June meeting minutes Wednesday, July 5 19:00 BST We will have the minutes from the June FOMC meeting to potentially provide some spark later on. But if you are looking for any hints of dovishness from the Fed, you probably won’t find that in the minutes. With the Fed being pretty much data-dependant, any major weakness for the greenback would have to come from incoming data. On that front, we have lots to look forward to in the second half of the week… ISM services PMI Thursday, July 6 15:00 BST On Monday, we saw the ISM manufacturing PMI come in well below expectations again (41.8 vs. 44.0) as activity contracted at a faster pace in June compared to May. It dropped to its lowest level since May 2020, at the height of the pandemic. While the manufacturing sector activity has been weakening, the services PMI has remained above the expansion level of 50.0 for the past three months – albeit, just above. If we start to see renewed strength come into the services sector despite high interest rates, then this should keep the doves at the FOMC quiet for another couple of months at least. However, if the services PMI also turns lower, then this will raise recession alarm bells, and potentially weigh on the dollar. US non-farm payrolls report Friday, July 7 13:30 BST Last week’s data releases were mostly positive, pointing to an economy that is continuing to defy expectations – until the manufacturing PMI indicated otherwise. The jobs market has been particularly strong with nonfarm payrolls data beating expectations in the last 14 months in a row! Will that trend continue? If it does, it will mean interest rates will likely remain higher for longer. This could benefit the US dollar in the short-term, even if high rates for longer might be something that could ultimately hurt the economy at some later point in time.
TVC:DXY
by FOREXcom
1
[ PMI ] Red Folder News Scenario's 🔥/ Eurusd For PMI data I'm favoring a continued push up throughout NY Session. If this does not happen then i anticipate the volatility to create the High of the day then slowly faded off the highs back to support at 1.08743. It is Monday and the market is setting up for the rest of the week so beware of that. On My last publishing I detail a potential fakeout on the Daily timeframe after the Friday candle Closed back inside the range last week above 1.0892 which is now our weekly support level. I'm looking for price to return to 1.096 daily resistance this week with the fakeout market structure. The Daily candle was bearish all day today and has only just recently flipped back bullish as we coincide with PMI data in 7 minutes. I took a buy and just TP with majoirty of my position., holding on to some during news with SL at B.E. Update : Price shot into profit and my runner position I took Profit at +25 Pips
Long
by ShrewdCatfx
Fake-Breakout coming out of last week ↗️ 🌞PCE news last Friday took price back inside the range between 1.08919 Weekly Support level and 1.09859 Daily Resistance Level. The Friday daily candle retraced nearly the whole Thursday candle that contained GDP and unemployment claims data. I'm looking for this price behavior to continue into the early trading of this new week. The Idea is that we should have continued down last friday towards 1.07821 Daily S/R Zone. We didn't and instead we Eurusd has spring itself back in the range. A Fake breakout or Fakeout. I can see us returning to the top of the range basically. The Monthly candle closed Bullish for June. Looking for the same during July with the first target for July being 1.11. The second target being 1.11853. Price has been consolidating so far this year on eurusd. However, the market structure is consolidating upwards. The 3 month candle jsut closed a 3rd consecutive bullish candle. Why not more bullish?
Long
by ShrewdCatfx
MarketBreakdown | Dollar Index, USDCHF, S&P500 Index, AUDJPY Here are the updates & outlook for multiple instruments in my watchlist. 1️⃣ Dollar Index (DXY) daily time frame 💲 The Index broke and closed above a resistance line of a falling expanding wedge pattern. It was retested on Friday. Probabilities are high, that a bullish movement will initiate from a broken trend line soon. 2️⃣USDCHF daily time frame 🇺🇸🇨🇭 The pair keeps consolidating. The market is stuck within a horizontal range. For now, the plan is to wait for a breakout of one of its boundaries. A bearish breakout of the support of the range will trigger a strong selloff, while a bullish breakout will be an important bullish signal. 3️⃣ S&P500 Index (SPY) daily time frame 💲 The market is currently testing a local daily high. If the price violates and closes above that, it will be a strong bullish signal. A bullish continuation will be expected then. 4️⃣ AUDJPY daily time frame 🇦🇺🇯🇵 The pair is trading in a long-term bullish trend. After the price set the last high, a correctional movement started. The pair formed a falling wedge pattern. Its resistance was broken last week. I believe that a trend-following movement will initiate soon. Do you agree with my market breakdown? ❤️Please, support my work with like, thank you!❤️
TVC:DXYLong
by VasilyTrader
10
DXY Potential UpsidesHey Traders, In the upcoming week, we are closely monitoring the DXY (U.S. Dollar Index) for a potential buying opportunity around the 102.600 zone. The DXY has been trading in a downtrend, but it recently broke out of this trend. However, it is currently in a correction phase, attempting to retrace for the second time before potentially continuing its upward movement. From a fundamental perspective, there are signals indicating a potential upcoming couple of rate hikes from the Federal Reserve in their next monetary policy decisions. This information can have a significant impact on the DXY and related currency pairs. I would recommend keeping a close eye on the DXY, not just prior to the new trading week, but also on a daily basis. This will help you trade USD pairs more professionally by identifying their direction. Additionally, monitoring the correlation between the DXY and the crypto market, as well as equities and indices, can provide valuable insights for trading decisions. By staying informed about the DXY's movements, you can enhance your trading strategy and make more informed decisions regarding USD pairs and related markets. Trade safe, Joe.
TVC:DXYLong
by JoeChampion
11
Eurusd ; more downside squeeze? 💀The Monthly candle has been pulling back from monthly resistance at 1.10255 since intitially tapping into it last Thursday. The Weekly candle is bearish and is rejecting weekly resistance zone 1.094. The Daily timeframe has confirmed a bearish breakout to the downside since it recently closed below Daily support level 1.0891. This Daily support level has now tunred into a Daily S/R Zone and may act as a resistance area for more downside potential. As stated on Tuesday's publishing " Momentum from Last week , Eurusd whats cooking? " I mentioned this statement --> "Downside target for week is 1.081 4Hr Support zone" . This would be 51 pip drop from the current daily candle and similar to the 49 pips drop that we saw today with GDP and unemployment claims data. Tomorrow we have Core PCE data. Now A few things could happen. 1) We move up prior to news then drop with news 2) We move down to our weekly target 1.081 before news and then shoot up with news 3) We consolidate, then increase back into the Daily range between 1.0891 Support and 1.096 Resistance with bad USD PCE data tomorrow. ** Also we must be aware that the monhtly candle is coming to a close. This could cause some very irrational volatility. It's the end of the week as well. It could be a freaky friday. I'm lowering size and wider SL. I may not even trade we'll see.
Short
by ShrewdCatfx
2
Momentum from last week ↘️ // Eurusd what's cooking? 👨‍🍳We have a fair share of news events this week to shake things up. These news events will be a catlayst for a coniuation of momentum or the cause for a reversal in the short term here. Now the Monthly candle is closing at the end of this week and we must keep in mind that it is closing bullish. I don't anticipate this weekly candle to drop 222 pips but it's not impossible. The Weekly candle from last week closed bearish rejecting Daily Resistance Zone 1.098 and Weekly resistance zone 1.1024. The top wick rejection was larger than the body of the candle denoting a good amount of sell pressure on Eurusd. The Friday daily candle closed bearish taking out all the lows from earlier in the week. Ideally for this week we would like to see the previous weekly candle's bottom wick (Approximately 48 pips ) be filled with momentum carried over from the prior week. 1.09160 is a Daily and 4hr S/R Level and may act as an area for price to distribute and take us to lower prices. If price gets a close above there we have clean traffic back up to 1.09564 4hr resistance zone. Otherwise if price can get a solid candle close below 1.08845 4hr Support zone then we have a nice 30 pip clean traffic range to decrease back to the low of last week at 1.0848 4hr Zone. Downside target for week is 1.081 4Hr Support zone If wrong, then expecting a range and possible eventual increase back to highs at 1.09875 Daily Resistance Zone.
Short
by ShrewdCatfx
Momentum Points South 🐻 We can observe the 4hr candle jsut closed below 1.0882 4Hr support Zone. Price also doesn't seem to care too much about our Daily support level 1.08915. Price retraced during London Session and gathered some liquidity while touching into weekly level 1.094 before coinciding with a drop with better than expected USD news. Also upon the 4hr candle close, it printed an engulfing candle and a siginficant top wick. All signs are screaming more downside to come. It may be after a deeper retrace to around 1.0882 and 1.08915 area but probabilities suggest lower prices to 1.0847 4hr support zone. This zone also happens to be the previous weekly candle bottom wick that we are now going to fill with momentum leftover from last week? we'll see if we get the push and fill the 33 pip range with clean traffic to the left down to 1.0847.
Short
by ShrewdCatfx
💭 Daily Tf Key Level plays Important Role ( 1.0918 )This week 1.0918 Daily Support/Resistance Zone will likely play an important role in the direction of this week's price behavior. This was a Major Support during last week's price action may very well act as a resistance level for the new week's price action. The new weekly candle gapped up but at the end of New York trading we can observe a hold of 1.0918 Daily S/R Zone. We are currently in a tight range to begin the week between this mentioned level and the 4hr support zone 1.0886. If Sellers fail to hold below 1.09180 then entry upon break and retest above it with targets at 1.0958 4hr Zone and the previous week's high at daily resistance zone 1.0986. Otherwise with Sells here we may continue to anticpate momentum to return to the downside. Our weekly target for sells remains at 1.081. More Analysis : Started off the week taking Sells from our Daily S/R Zone 1.0918 . Earned +.5% on the account about after commissions. It turned out to be the high of the day. Being pro-active with your trading plays an important role in profitability. Trade where it is most uncomfortable and you will likely see your results improve. Not Financial advice this has been and will always be education.
Short
by ShrewdCatfx
DOLLAR INDEX - FUNDAMENTAL ANALYSISNo reason to fight dollar strength this week - ING Central bank communication at this week's Sintra conference in Portugal has stayed pretty hawkish. The core message seems to be that low unemployment rates have allowed economies to withstand large tightening cycles reasonably well, meaning that inflation has not fallen as much as expected. Expectations for the duration and terminal rates for tightening cycles are being revised higher. This is most credibly being done in the US, where the economy appears to be outperforming. This is allowing the dollar to stay quite bid - especially against those currencies without much/any interest rate difference such as the Japanese yen and the Chinese renminbi. On the latter, policymakers are gently trying to fight the steady move higher in USD/CNY by setting lower fixings. However, they may be forced to cut the required reserve on FX deposits as they did last September if they want to send a stronger message of displeasure over renminbi depreciation. And as we have seen over the years, a steady uptrend in USD/CNY is not conducive to an overall bear trend in the dollar. Back to the Fed. If central banks are increasingly data-dependent, what's next in store for the Fed? The most important data point of the week will be tomorrow's release of the core PCE deflator for May expected at 0.3/0.4% month-on-month. Presumably, investors will be a little long dollars going into that release. Before that, however, we today see the weekly initial jobless claims figures. These have recently settled at higher levels. Any big upside surprise here could knock the dollar intra-day on the view that tighter policy is finally easing up labour supply - a key shoe to drop in the fight against inflation. DXY looks biased to 103.30/35 and possibly 103.65 - as long as initial claims do not spike higher today.
TVC:DXYShort
by thunderpips
6
Arguments of a week's size. Hi! We have some important signs for the dollar index that don't bode well for the crypto market! This is the 1 WEEK CHART. This is a high degree of reliability. In fact, what we saw on last week's hourly chart has already developed into a persistent reversal. 1: Ishimoku. The green Kumo cloud has halted Bitcoin's fall. In fact its lower boundary Senkou B has not been tested. Kijun-sen also does not show resistance to the candlestick, and usually turns out to be the next support later... 2. EMA100 area is a support in the weekly chart. This is a very good signal for the continuation of USD strengthening trend! 3. The volatility has stopped falling and the first red shortening bar appeared. I'm sure in a few weeks there will also be the first black cross signifying a squeeze before an upside shot. 4. Stochastic has reversed and is flying up. 5. This is a Heikin Ashi chart and it is more sensitive to a trend reversal than normal Japanese candlesticks. You can see how we started this week. Conclusion. Remember, Bitcoin is still private money (even if influential funds buy it for investment purposes). Bitcoin has no monetary authority, it plays on the open market against fiat currencies (primarily the dollar), which are managed by powerful financial institutions. This new weekly green candle is the result of a +0.25% increase in the Fed's key rate. Dollar borrowing has become expensive. Why should there be free liquidity available in the market to inject into high risk assets? Or do you believe that private hands around the world will outbid the Fed? No, I do not believe that this weak sideways move of Bitcoin in November-December was a consolidation. Now the curses will come ))) P.S. If I'm wrong, that's my problem. You can watch this chart and decide your’s opinion. I don't want to change your mind at all. I am only pointing out my thoughts. But I would like people to think better.
TVC:DXYLong
by averkie_skila
3
GOLD - FUNDAMENTAL ANALYSISGold Price Forecasts Revised Lower For Year-End 2023 And 2024 At ABN AMRO In her extensive XAU strategic note to clients, Georgette Boele, Senior Economist at ABN AMRO warns of a downgrade to the bank's 2023 and 2024 gold price forecasts. The analyst cites the gold price being close to all-time highs, a level that should it fall, might not be seen for another five years. With FED monetary policy easing being prices-in, the upside is likely to be limited from here. Gold prices so far have been erratic in 2023. The price of gold started the year on a bullish note, recording a 13% surge in prices by May 4. According to the analyst, however, momentum has since flagged, and the precious metal now seems to be in a phase of consolidation. This change in trend aligns with Boele's observation that investors may be hesitant to buy at current levels, especially with the specter of a significant drop looming over the market; hinting at the risk-averse nature of gold investors, who tend to prioritise long-term stability over short-term gains. Boele's shift in her Federal Reserve outlook significantly informs her predictions. Originally, she did not expect an aggressive rate-cutting spree in the short term but believed that the easing cycle would commence towards the end of 2023. However, recent developments have led her to revise these expectations. "Last week, we changed our Fed view and also our US dollar view" says Boele. "We now expect a recession to start in Q4 and rate cuts to come in Q1 2024. We expect the last rate hike of 25bp at the Fed’s July meeting and no rate cuts this year. We still forecast aggressive rate cuts in 2024. We now have a total of 175 basis point of rate cuts in 2024," she adds. This forecast indicates her belief that the Federal Reserve will take assertive measures to stimulate the economy and combat the recessionary pressures she expects to emerge. In line with her altered expectations for the Federal Reserve, Boele's perspective on the US dollar has also evolved. With fewer rate cuts expected for the remainder of 2023 and into 2024, she has upgraded her view on the US dollar, seeing this as a positive turn. This shift indicates her belief in the resilience of the US Dollar and its likely performance in the face of adverse economic conditions. "As a result of the change in our Fed view we have upgraded our view on the US dollar," says the analyst. "We no longer have a rate cut for the Fed this year and fewer total rate cuts in 2023-2024. This is a positive for the US dollar. Our view is roughly in line with the market." Boele's points out that rate expectations, both real and nominal, alongside the outlook for the US dollar, are crucial drivers for gold prices. Consequently, her adjusted outlook for the Federal Reserve and the US dollar has led her to downgrade her gold price forecast for 2024. "So we have also downgraded our gold price forecast for 2024 to 2,000 USD per ounce (from 2,200 before) We now have for 2023 and 2024 a year-end forecast of 2,000," says the economist. Despite the Federal Reserve's potential easing typically being seen as a boon for gold prices, Boele sees limited upward potential for gold in relation to the US dollar. Investors, she notes, currently hold net-long gold positions, and there is a risk that part of these will be liquidated. "What is the reasoning behind this?" she asks. "The start of monetary policy easing by Fed is generally positive for gold prices. But as the market has already anticipated this, it is already reflected in the gold price. Therefore we think that upside in gold prices versus the US dollar is rather limited from current levels, " she adds. Boele offers a word of caution for investors. Given the currently high levels of gold prices and potential risks, she suggests that being long may not be the most attractive stance from a risk-reward perspective.
OANDA:XAUUSD
by thunderpips
5
DOLLAR INDEX - FUNDAMENTAL ANALYSIS2023-2024 exchange rate forecasts from Nordea As far as Federal Reserve policy is concerned, Nordea has revised its forecasts and now expects that there will be two further rate hikes with a 25 basis-point hike in July and another hike in the Autumn. It also expects that the Fed will be slower to cut rates and adds; “The sticky core inflation picture and the resilient economy also mean that we postpone the first rate cut in our profile to the second half of 2024.” As far as the ECB is concerned, Nordea agrees with the strong consensus that there will be a further hike in July. At this stage the bank expects this will be the last rate hike, but does recognise the risk that rates will have to increase further. It notes; “Risks are clearly tilted towards the hiking cycle continuing also after the summer, though, and if data holds up and core inflation proves sticky, hikes could easily continue in September and even beyond.” In this context, there is a significant possibility that the ECB will complete rate hikes ahead of the Federal Reserve which would tend to support the dollar. Nordea considers that markets are too pessimistic on the dollar on the short-term view and expects a Euro to Dollar (EUR/USD) exchange rate retreat to 1.07 during the Summer. The bank still expects that the dollar will lose ground next year as it becomes clear that the Fed tightening has had a sufficient impact on inflation and the economy.
TVC:DXYShort
by thunderpips
2
EUR USD - FUNDAMENTAL ANALYSISMore hawkish global central bank policy actions have increased reservations over the global economy and the latest Euro-Zone data was also significantly weaker than expected. Weaker risk conditions will also tend to weaken the Euro, especially with scope for defensive dollar demand. In this context, confidence in the global economy will need to rebound for EUR/USD to secure gains much above 1.1000. US Dollar (USD) Exchange Rates Forecast - US Economy in the Limelight The Federal Reserve remains determined to maintain a hawkish policy stance and expects interest rates to increase further, especially with stubborn inflation in the services sector. The US economic developments will, however, be a key element. The manufacturing data has remained weak while services-sector growth has remained strong. The US PMI manufacturing index dipped to a 6-month low of 46.3 for June from 48.4 previously and below expectation of 48.5. The services-sector index edged lower to a 2-month low of 54.1 from 54.9 and in line with expectations. Within the data, overall selling prices increased at the slowest rate since October 2020. Manufacturing prices increased at the slowest rate for three years with services-sector increases at 5-month lows. MUFG still considers that the labour market is showing important signs of weakness. It notes; “evidence is building that we are close to a turn toward weaker employment data. It is already becoming clearer in the claims data.” Initial claims have been above 260,000 for three consecutive weeks for the first time since October 2021. Excluding the covid period, it is the highest level since September 2017. The bank also points to the underlying increase in continuing claims and added; “every time continued claims increases to the degree most recently (570k), the US labour market weakens notably and recession follows.” According to the bank; “Our current EUR/USD forecasts are 1.0900 in Q2 and 1.1300 in Q3 which reflects our view of a turn in the jobs data that intensifies once again recession fears and strengthens expectations of rate cuts at the back-end of this year and in 2024, which will help fuel renewed dollar selling.” Euro (EUR) Exchange Rates Dominated by Euro-Zone Reservations Confidence in the Euro-Zone outlook remains fragile and the latest PMI business confidence data was weaker than expected. The manufacturing index dipped to a 37-month low with a 5-month low for services. Socgen expressed some reservations over the data; “The only caveat is that the European PMI data aren’t a very useful gauge of what’s happening to the economy, and should be treated with some scepticism.” Nevertheless, it added; “A return to 1.06 is a significant risk.” According to Berenberg; In the longer term, we remain moderately optimistic for the euro. However, the economic weakness in the Eurozone is hampering the recovery. We have therefore adjusted our currency forecast slightly downwards and only expect a EUR/USD exchange rate of 1.12 (previously 1.15) by the end of the year.” Credit Agricole also sees barriers to further Euro gains; “the EUR rate markets have already priced in some ECB tightening beyond July, suggesting that positives are already in the price of the currency. The bank sees other hurdles; “In addition, the EUR remains the biggest long in the G10 FX market while the broad EUR NEER that the Governing Council uses to gauge the currency's strength across the board has moved very close to its 2009 record high.” Danske Bank expects the Euro will struggle; “In the euro area, there have been some weakening signs in macro data as of late, which we expect to become even more pronounced in H2, as the full impact of last year’s monetary policy tightening hits the real economy.” It adds; “Overall, we think the US economy will prove more robust relative to the European counterpart in H2.” It has a 6-month EUR/USD forecast of 1.0600. According to ANZ; “A relatively more hawkish ECB, with more work to do in taming inflation, could bring about some upside in the EUR vs the USD in H2 2023. However, given that economic data surprises in the Euro-area are turning negative relative to the US, we believe that any upside in the EUR will be capped at 1.12 in Q3. ANZ added; “We also think that any rally in the EUR will likely be driven by USD-related factors.”
Long
by thunderpips
2
GBPUSD, H4 | Bounce off major support?Price is testing a major support level at 1.2684 which is a pullback support + ascending support + bullish ichimoku cloud. A bounce from here could see prices rise up towards the take profit target at 1.2830 which is a multi-swing high resistance. Please be advised that the information presented on TradingView is provided to FXCM (‘Company’, ‘we’) by a third-party provider (‘Name of third party provider). Please be reminded that you are solely responsible for the trading decisions on your account. There is a very high degree of risk involved in trading. Any information and/or content is intended entirely for research, educational and informational purposes only and does not constitute investment or consultation advice or investment strategy. The information is not tailored to the investment needs of any specific person and therefore does not involve a consideration of any of the investment objectives, financial situation or needs of any viewer that may receive it. Kindly also note that past performance is not a reliable indicator of future results. Actual results may differ materially from those anticipated in forward-looking or past performance statements. We assume no liability as to the accuracy or completeness of any of the information and/or content provided herein and the Company cannot be held responsible for any omission, mistake nor for any loss or damage including without limitation to any loss of profit which may arise from reliance on any information supplied by Name of third party provider. The speaker(s) is neither an employee, agent nor representative of FXCM and is therefore acting independently. The opinions given are their own, constitute general market commentary, and do not constitute the opinion or advice of FXCM or any form of personal or investment advice. FXCM neither endorses nor guarantees offerings of third party speakers, nor is FXCM responsible for the content, veracity or opinions of third-party speakers, presenters or participants. High Risk Investment Warning Trading Forex/CFDs on margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you. Forex Capital Markets Limited (www.fxcm.com): CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. FXCM EU LTD (www.fxcm.com): CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. FXCM Australia Pty. Limited (www.fxcm.com): ** Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763), please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at www.fxcm.com FXCM Markets LLC (www.fxcm.com): Losses can exceed deposits.
Long
by FXCM
1
EUR USD - FUNDAMENTAL ANALYSISForeign exchange strategists across global financial institutions have been setting out their predictions for the future performance of the EUR/USD, presenting an amalgamation of analyses that span from modestly optimistic to overly bearish. Euro-Dollar rate predictions are pinned upon factors ranging from central bank decisions, inflation metrics, and global market sentiment to regional economic performance. Berenberg: Modest Optimism Despite Economic Weakness Ulrich Urbahn, CFA Head Multi Asset Strategy & Research at Berenberg, sees the Euro (EUR) gaining ground against the US Dollar (USD) following the European Central Bank's (ECB) recent monetary policy decision. "After the ECB’s monetary policy decision, the euro gained a little more than a cent and is now trading at a good USD 1.09 per euro," says Urbahn. His stance is that the Euro (EUR) has the potential to recover, brushing aside the recent corrective phase. However, he is cognisant of the hurdles posed by the frail economy in the Eurozone, which he sees as a drag on the currency's recovery. Urbahn remains modestly optimistic in the long run, although this outlook is tempered by a slight downward revision in the forecast. "In the longer term, we remain moderately optimistic for the euro. However, the economic weakness in the Eurozone is hampering the recovery," he adds. Consequently, Urbahn now foresees a year-end EUR/USD exchange rate of 1.12, a step down from his previous 1.15 forecast. Scotiabank: The Bite of Rising Interest Rates Shaun Osborne, Chief FX Strategist at Scotiabank, presents a rather more cautious view on the euro's performance, pointing to the damaging effects of rising interest rates on the European economy. He notes a dramatic fall in the Eurozone's PMI data for June, with French Services and German Manufacturing data showing significant dips, effectively signalling a stunted growth rate as the impact of interest rate hikes begins to bite. "Weaker than expected Eurozone PMI data for June hammered the EUR. French Services data fell to 48 (52.5 in May), pulling the Composite reading to 47.3 (from 51.2). German Manufacturing slumped to 41 (43.2 last) and the Composite reading dipped to 50.8 (from 53.9)," says Osborne. Nevertheless, the analyst still anticipates the European Central Bank (ECB) to follow through with rate hikes in July, despite this being in the face of weaker growth. "Markets have tempered ECB expectations as a consequence but policymakers are still very likely to deliver on hikes in July at least. Weaker growth is needed to break core inflation pressures," he adds. Danske Bank: The Force of US Yield and Rate Increases Danske Bank's Analyst Kirstine Kundby-Nielsen gives a more detailed view of the shifting global macroeconomic landscape. The analyst points to the increased US yields and the markets' anticipation of a longer period of elevated interest rates as the principal drivers of the EUR/USD exchange rates' slight downward drift. The strategist also highlights the comments from Federal Reserve Chair Jerome Powell about the potential need for one or two more US rate increases in 2023 as a significant factor affecting the exchange rate. "EUR/USD drifted slightly lower towards 1.0950 on higher US yields and global markets generally pricing a 'higher for longer' interest rate environment," says Kundby-Nielsen. Highlighting the increasing likelihood of a rate hike from the Fed, she adds, "The 2-year US Treasury yield hit the highest level since March, and the market implied likelihood of a 25bp hike from the Fed in July increased to above 80%." The strategic analyst further underlines the market response to Powell's comments on the potential for further rate increases this year. With such economic dynamics in play, Kundby-Nielsen indicates that Danske Bank has assumed a short position on the EUR/USD spot, expecting the underlying fundamentals to swing in favour of the USD. Credit Agricole: The ECB's Unfinished Rate Hike Business Valentin Marinov, Head of G10 FX Strategy at Credit Agricole, sheds light on the relatively stronger performance of the euro against other major currencies. According to Marinov, this is attributable to the increasing market expectations of further rate hikes following the June ECB meeting. "The EUR was able to outperform other majors like the USD, JPY and CHF as well as recover vs the GBP in recent days," says Marinov. He postulates that the attractiveness of the euro derives from an anticipation that the ECB is not done with hiking policy rates. "This could be made quite apparent by next week’s Eurozone HICP data, which may show that core inflation has re-accelerated in June," he adds. Marinov forecasts that if such data convinces markets to expect more aggressive ECB rate hikes, the EUR could regain more ground. Yet, he notes potential obstacles, including pre-emptive market pricing of ECB tightening, the EUR's record high strength, and possible negative surprises from the preliminary Eurozone PMIs for June. MUFG: The Return to Pre-Ukraine Levels Last but not least, Lee Hardman, Senior Currency Analyst at MUFG, takes a long-term perspective, seeing the recent rebound of the EUR against the USD as part of a greater bullish trend. He states that the EUR has made up for most of its May sell-off, reversing the trend to climb back up. He credits the Federal Reserve's decision to halt the rate hike cycle and the ECB's increasing focus on the core inflation outlook as crucial to this rebound. "The EUR has rebounded against the USD so far this month and in the process has reversed most of sell-off in May," says Hardman. He forecasts a return to pre-Ukraine crisis levels, expecting the pair to move back to the region of 1.1500. "The run of higher highs (in January and April) followed by higher lows (in March and May) so far this year highlights that the bullish trend remains in place," he adds. Nonetheless, Hardman does anticipate that further USD corrections are likely unless supported by stronger US economic data. This, combined with an expected uptick in Eurozone's core inflation over the summer, could prompt the ECB to consider additional rate hikes in September.
Long
by thunderpips
2