- EUR/USD stays calm above 1.0900 to start the new week.
- Markets will pay attention to comments from ECB officials.
- The pair's action is likely to remain subdued in the second half of the day.
EUR/USD fluctuates in a narrow channel above 1.0900 early Monday following last week's impressive upsurge. There won't be any high-tier data releases that could impact the pair's performance, leaving comments from European Central Bank (ECB) officials as the only potential catalyst. In the second half of the day, trading action is likely to remain subdued with the stock and bond markets in the US remaining closed in observance of the Juneteenth holiday.
ECB Chief Economist Philip Lane, Governing Council member Isabelle Schnabel and ECB Vice President Luis de Guindos will be delivering speeches later in the day.
Markets expect the ECB to opt for one more 25 basis points (bps) increase in key rates in July. A confirmation of such a policy step shouldn't come as a surprise. Instead, investors will want to know whether the ECB will need to continue to tighten the policy after July. Although it's unlikely, the Euro could gather strength in case officials voice a willingness to hike rates in September.
On Wednesday and Thursday, FOMC Chairman Jerome Powell will testify on the monetary policy decisions before lawmakers. The Federal Reserve (Fed) released the monetary policy report to Congress late Friday, in which it reiterated that the outlook for the policy rate was subject to a "considerable uncertainty." Markets are pricing in a nearly 75% probability of a 25 bps Fed rate hike next month.
EUR/USD Technical Analysis
EUR/USD returned within the ascending regression channel early Monday. The 1.0900 level (mid-point of the ascending channel) aligns as a strong support for the pair. The Fibonacci 61.8% retracement level of the latest downtrend and the 20-period Simple Moving Average (SMA) also reinforce this level.
If the pair falls below 1.0900 and starts using this level as resistance, it could extend its correction toward 1.0850 (lower-limit of the ascending channel, Fibonacci 50% retracement).
On the upside, 1.0960 (static level, upper-limit of the ascending channel) could be seen as the first resistance ahead of 1.1000 (psychological level) and 1.1050 (beginning point of the latest downtrend).
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