- EUR/USD outlook is under pressure near 1.1340 amid dovish ECB and softer EU data.
- US Dollar rebounds on stronger risk sentiment and hawkish Fed commentary, helping cap EUR/USD upside.
- All eyes on this week’s US and Eurozone data, including durable goods, confidence indices, and ECB/Fed policy guidance.
The EUR/USD outlook has turned negative on Tuesday as the fundamental factors favor the US dollar. The pair is trading at 1.1335, at the time of writing, down nearly 0.40%. The diverging central banks outlooks and softer Eurozone data weighs on the euro.
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The latest comments from the ECB officials have reinforced the need to cut the rates in the June meeting. According to ECB Council Member, Gediminas Simkus, “The risk that inflation will be below the target in future has increases.” He also added that the borrowing costs are high, near neutral range and euro is strong. His willingness to continue easing policy weighed on the shared currency. The fellow member Francois Villeroy also echoed the same dovish tone and acknowledged that the ECB policy normalization is not yet complete. And the softer French inflation may accelerate accommodative stance.
The shift is critical as the divergence between ECB and the Fed may heighten. While the ECB is close to another cut, the Fed is still reluctant. Fed President Kashkari reinforced the view supporting restrictive policy and skeptical of inflation surge due to tariffs.
Meanwhile, the German data failed to impress buyers. The GfK Consumer Confidence Index for June surged to only -19.9, missing expectations and revealing weaker household sentiment. Coupled with softer French inflation, has weakened the euro.
On the other hand, the US dollar benefits from the shift in the market sentiment. The DXY climbed back above 99.50 area, recovering earlier losses. Investors have started to price in a delayed rate cut by the Fed while ECB’s dovishness also gives an edge to the dollar.
Key Events for EUR/USD Today
- US Durable Goods Orders (April)
- CB Consumer Confidence (May)
EUR/USD Technical Outlook: Decisive Trendline Support
The 4-hour chart shows the pair is approaching the rising trendline support. The pair is well above the 20-period SMA which may support the price from an abrupt fall. However, sustaining below the 1.1335 may initiate selling towards 1.1260.
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On the flip side, if the trendline support holds, the price can surge back to 1.1400 handle ahead of 1.1573, a multi-month high formed in April. However, the RSI turns lower but above the 50.0 level. It suggests a potential consolidation before a decisive move.
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Saqib Iqbal
