- US dollar gained momentum during the American session on higher Treasury yields.
- Eurozone and US preliminary June PMIs will be watched closely.
- The EUR/USD retreated from monthly highs, still bullish but losing conviction.
The EUR/USD hit the highest level in months at 1.1011 but failed to hold above 1.1000 and corrected to the 1.0950 area. The recovery of the US Dollar pushed the pair to the downside. Expectations from the European Central Bank (ECB) were offset by Federal Reserve (Fed) Chair Powell's testimony, suggesting that more rate hikes are likely.
Analysts are currently discussing the final rate from the European Central Bank. Some forecast one more hike in July to 3.75%, and others include another hike in September, bringing the rate to 4%. Those actions will be "data-dependent", mostly Consumer Price IndexI-dependent. The flash PMI for June, to be released on Friday, will be important. The German Manufacturing PMI is expected to rise to 43.5, and the Service PMI to decline from 57.2 to 56.2. The Eurozone Manufacturing PMI is expected to remain at 44.8, and the Service PMI to drop from 55.1 to 54.5.
US yields rose on Thursday, offering support to the greenback. The US Dollar Index rose after three days of declines, retaking the 102.00 area. Fed Chair Powell repeated that interest rates will likely increase in the coming months. The Fed's decision will emerge from a balance between economic performance and inflation figures. Data released on Thursday showed Initial Jobless Claims at the highest level since October 2021, but on the positive side, an increase in Existing Home Sales. On Friday, the June PMI will be watched closely.
EUR/USD short-term technical outlook
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The EUR/USD failed to retain the 1.1000 area and pulled back. The trend is up, but the Momentum is fading. The Euro needs a confirmation above the mentioned area to clear the way for a test of the key barrier located slightly below 1.1100. The current market context shows the US dollar recovering momentum, which could make it difficult for the Euro to resume the upside.
On the 4-hour chart, the Euro remains above key levels and is supported by a short-term uptrend line. Technical indicators offer mixed signals. Ahead of the Asian session, the pair must hold above 1.0940 (20-Simple Moving Average) and regain 1.0960 for the Euro to recover momentum. A slide under 1.0940 would point to an extension to the downside, targeting the 1.0910/20 support band. A break lower would clear the way for a test under 1.0900.
View Live Chart for the EUR/USD
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