EUR/USD Reaches Four-Month High Amid Investor Indecision; Future Gains Dependent on U.S. Economic Data
On Monday, EUR/USD reached its highest level in four months but saw investor hesitation as the session advanced. The New York session began around 1.0910 after reaching 1.0881 in Asian trading, bolstered initially by softer U.S. yields, which pushed EUR/USD to a peak of 1.09225. The strength of the euro was also supported by gains in equities and gold, which pressured the U.S. dollar. However, as Fed Chair Powell spoke, yields firmed up and spreads tightened, leading to renewed buying of the U.S. dollar. This buying pressure pushed USD/CNH higher, diminishing some gains in stocks and gold, and causing EUR/USD to dip below 1.0895, ending the day down by 0.15%. A daily doji appeared on the charts, and a divergence in the daily RSI suggested caution for EUR/USD bulls, indicating investor indecision. Nevertheless, the monthly technical indicators remain optimistic.
The recent rally of EUR/USD to a four-month high is promising, but significant resistance levels persist, and further gains are likely to hinge on forthcoming U.S. economic data. Upcoming reports on U.S. June retail sales and weekly jobless claims will be crucial in determining if the pair’s upward momentum continues or if a correction is imminent. Retail sales are anticipated to decline by -0.3% compared to a 0.1% rise in May, while increases in weekly and continuing jobless claims are expected. If retail sales fall short of expectations and jobless claims rise more than anticipated, U.S. yields may continue their recent decline. This scenario could further weaken the dollar, diminishing its yield advantage over the euro and potentially overcoming resistance near January’s -163/-162 basis points spreads.
Tighter spreads combined with a weaker dollar could drive EUR/USD past the trend line from the 2023 yearly high and the 1.0940/80 resistance, where several daily highs from March are located. Technical indicators suggest these barriers are susceptible, with rising daily and monthly RSIs that are not yet overbought. A daily bull hammer formed after buyers stepped in following the day’s dip, and the pair remains above the daily cloud and several daily moving averages. If the data supports continued euro strength, a test of the 1.1050/1.1100 resistance area or higher could be possible.
