EUR/USD hovers around 1.0750 as traders brace for central bank policy gyrations

• The Dollar strengthens, but the Euro remains firm, with EUR/USD at 1.0746 on the expectation of changes in monetary policy.
• The anticipated “jump and hike” by the Fed could change interest rate dynamics between the US and the EU, potentially favoring the Euro.
• The potential economic downturn in the US could trigger a “dollar smile” as markets keep an eye on major economic indices.

The pair EUR/USD It trims some of its earlier gains but remains trading in positive territory amid a busy week on the economic calendar, with major central banks tightening their monetary policies. The US dollar (USD) strengthened ahead of Wednesday’s Fed decision, but has yet to eclipse the strength of the Euro (EUR). At the time of writing, the EUR/USD pair is trading at 1.0746, practically sideways.

Markets awaiting key currency moves as USD strengthens against resilient Euro

Wall Street is trading with modest gains ahead of the Federal Reserve’s (Fed) June policy meeting. The Fed is expected to keep rates on hold, as shown by money market futures, with the CME Fed WatchTool odds of no change in June hovering around 71%. However, for the next month, the odds of a 25 basis point hike are above the 50% threshold, reinforcing the idea of ​​a Fed jump followed by a rate hike.

However, the last two monetary policy decisions by major central banks surprised markets with unexpected decisions by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC). Although, at the very least, EUR/USD traders should be aware that the Fed could rock the boat and hike rates in June.

On the Eurozone (EU) front, the economic calendar on Monday was light, but would pick up the tone on Tuesday with German inflation. On Thursday, the European Central Bank (ECB) is expected to raise rates by 25 basis points, which, according to estimates for the Fed and the ECB decision, would narrow the interest rate differential between the US and the EU. , favoring the latter.

That said, expect upward pressure on the EUR/USD. Even so, the economic deterioration in the US could trigger the theory of the “smile of the Dollar”, which supports the USD in phases of global economic tension.

upcoming events

In the US, the consumer price index (CPI) for May and the NFIB business optimism index will be published. On the EU front, the harmonized index of consumer prices (IPCA) for Germany and Spain for both countries and the ZEW economic sentiment.

EUR/USD Price Analysis: Technical Insights

EUR/USD has been consolidating in the 1.0670/1.0790 zone for the past eight days, unable to break out of the range, but with the 100, 20 and 50 day EMAs sitting above price cash. Therefore, EUR/USD is slightly lower in the short term. For a bearish continuation, EUR/USD needs to break the June 9 daily low at 1.0742, which could open the door for further losses once broken. The next support would be 1.0700, followed by last week’s low at 1.0667, before falling towards 2020 lows around 1.0635. Conversely, EUR/USD resistance levels lie at the confluence of the 100 and 20 day EMAs at 1.0766/68, followed by 1.0800. The next resistance lies at 1.0811, the 50-day EMA.