EURUSD: return to the balance line

On Tuesday the 16th of June, trading on the euro closed down. The single currency shed 0.53% against the dollar to reach 1.1263%. The decline started during the European session from a high of 1.1353 after the euro crosses started weighing down on our main pair.

The main EURGBP cross favoured the GBP bulls following news about Brexit. The UK and EU agreed to redouble their efforts to reach a trade agreement by the end of the year. Both sides have undertaken to hold additional meetings in the coming months.

The drop on the EURUSD gathered pace following the Fed Chair’s testimony in front of the Senate Banking Committee. The US dollar got a boost from Powell as a safe haven asset, as well as from strong retail sales data in May. Due to the increase in retail sales, US stock indices closed the day up.

Powell reiterated that the economy has a long road to recovery ahead. The retail sales index for May showed an increase of 17.7% against a forecast of +7.9% and a previous reading of -14.7%. The EURUSD pair dropped by 123 pips to 1.1253.

Day’s news (GMT+3):

  • 12:00 Eurozone: CPI (May).
  • 15:30 Canada: CPI (May).
  • 15:30 US: building permits (May), housing starts (May).
  • 17:30 US: EIA crude oil stocks change (12 Jun).
  • 19:00 US: Fed Chair Jerome Powell’s speech.
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Current situation:

The bears have recovered all their losses from the previous day on the back of the euro crosses. The pair has recovered to the balance line at 1.1285. The 45th degree runs through this level, making it a strong support. Since all the euro crosses are on the rise, the conditions are ripe for a return to the 67th degree at 1.1307. Meanwhile, the dollar is trading down against all the majors.

We had expected pressure on the euro to increase closer to Thursday. Jerome Powell sped this up. Today at 19:00 EET, he will speak again. We’re expecting a test of 1.1290 followed by a decline to 1.1245. Expect a surge in volatility after the release of the consumer inflation report.

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