The EUR/USD currency pair has risen to 1.0740 in Tuesday’s European session despite a dull outlook for Germany’s economy. This increase is attributed to growing optimism for the Federal Reserve to cut interest rates twice this year, which has boosted investors’ risk appetite. As a result, the US Dollar Index (DXY) has dropped to 105.40 as demand for safe-haven assets has decreased.
Investors are closely watching the US core Personal Consumption Expenditure price index (PCE) data for May, which will be released on Friday. This data serves as the Fed’s preferred measure of inflation and will provide insights into the central bank’s interest rate reduction plans for the year. The EUR/USD pair is expected to react to this data as it continues to climb in response to market sentiment favoring riskier assets.
However, uncertainties remain regarding the Eurozone’s economic outlook, particularly in Germany. Recent data from the IFO Business Climate index shows a decline in market sentiment for both current conditions and future expectations in the country. Additionally, the Eurozone economy is facing challenges with slowing economic activities and the potential for subsequent rate cuts from the European Central Bank (ECB).
Political uncertainty in France is also adding to the Eurozone’s challenges, as the country gears up for snap legislative elections scheduled for June 30. French President Emmanuel Macron called for these elections following his party’s defeat in the European parliamentary elections on June 9. This political instability, coupled with economic concerns, is contributing to the Euro’s uncertain outlook.
In terms of technical analysis, the EUR/USD pair is facing pressure near the downward-sloping border of a Symmetrical Triangle pattern. The pair is trading below the 50-day Exponential Moving Average (EMA), signaling a bearish short-term outlook. The 14-day Relative Strength Index (RSI) is hovering around 40.00, indicating a potential bearish momentum if it falls below this level.
Investors are also monitoring economic indicators such as the Consumer Price Index ex Food & Energy (YoY) to gauge inflationary or deflationary trends. This data, released by the US Department of Labor Statistics, compares the prices of goods over a period of time. A high reading is considered bullish for the US Dollar, while a low reading is bearish. Overall, the EUR/USD pair’s movement will be influenced by a combination of economic data, political developments, and market sentiment in the coming days.
