Daily Price Outlook
In the early Tokyo session, the EUR/USD pair swiftly rebounded from the support level near 1.0800. Despite the lack of progress in the US debt talks over the weekend, the major currency pair managed to hold steady around 1.0800.
US President Joe Biden and House of Representatives Speaker Joseph McCarthy are set to meet on Monday to negotiate a bipartisan deal, as previous proposals from Republicans were deemed unacceptable. The White House remains firm, showing no willingness to compromise on the overall budget reduction of 8%.
The S&P 500 experienced further losses in early Asian trading, reflecting investors' concerns that Biden may need to invoke the 14th Amendment to protect the US economy from default. These worries have carried over from Friday's negative sentiment, persisting in Monday's US equity market.
The US Dollar Index (DXY) retreated after a hesitant pullback, closing at 103.20. Growing apprehension surrounding the US borrowing cap increase has pressured the USD Index.
Furthermore, Federal Reserve Chairman Jerome Powell's dovish interest rate outlook has contributed to the weakening of the US dollar. Powell emphasized that the current financial situation, which led to stricter lending regulations, reduces the need for significant interest rate hikes.
In contrast, the Eurozone requires more interest rate increases to tackle persistent inflation.
European Central Bank (ECB) President Christine Lagarde expressed the ECB's determination to take bold measures to bring inflation back to 2%. Lagarde emphasized the need for multiple interest rate hikes to alleviate inflationary pressures.
Investors should be mindful of the Eurozone's rising inflation rate, which reached 7% in April. Although food prices have declined, higher energy and service prices have offset this decrease.
EUR/USD – Technical Outlook
The EURUSD pair concluded last Friday above the 1.0795 level, registering some intraday gains. However, we observed that the price encountered resistance from the correctional bearish channel, accompanied by clear negative signals from the stochastic indicator. Additionally, the EMA50 is exerting consistent downward pressure on the price.
Considering these factors, there is a valid possibility of a resumption of the correctional bearish trend. The initial targets would involve breaking below 1.0795, paving the way for a decline towards 1.0730. It's worth noting that surpassing levels at 1.0835 and 1.0860 would halt the anticipated decline and potentially lead to further gains in the future.
For today's trading, the expected range lies between 1.0730 as support and 1.0880 as resistance. In terms of trend, we anticipate a bearish sentiment for today. Let's keep an eye on the exciting developments in the EURUSD pair!
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