EUR/USD hangs near its lowest level since early May, seems vulnerable below 1.0700 mark
|- EUR/USD struggles to attract any meaningful buyers and is undermined by a combination of factors.
- Political uncertainty in Europe, along with Friday’s dismal Eurozone PMIs, seems to weigh on the Euro.
- The Fed’s relatively hawkish stance lifts the USD to a multi-week top and further acts as a headwind.
The EUR/USD pair remains depressed for the third straight day on Monday and trades around the 1.0690-1.0685 region during the Asian session, just above its lowest level since early May.
The shared currency continues to be undermined by uncertainties about the outcome of a snap election in France, which has been fueling concerns that a new government will worsen the fiscal situation in the Eurozone's second-largest economy. Furthermore, the flash PMIs released on Friday indicated that the growth of business activity in the Eurozone slowed sharply in June. This, along with some follow-through US Dollar (USD) buying, turns out to be key factors exerting downward pressure on the EUR/USD pair.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, advances to its highest level since May 9 in the wake of Friday's flash PMI, which showed the US business activity crept up to a 26-month high in June. The data backs the case for the Federal Reserve's (Fed) patient approach, though signs of easing inflationary pressure keep a September rate cut on the table. This might hold back the USD bulls from placing aggressive bets and help limit any further depreciating move for the EUR/USD pair.
Traders might also prefer to wait for this week's release of the US Personal Consumption Expenditures (PCE) Price Index data on Friday for cues about the Fed's rate-cut path. This, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the EUR/USD pair. Traders now look to the release of German IFO Business Climate and speeches by influential FOMC members to grab short-term opportunities in the absence of any relevant macroeconomic releases from the US.
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