EURUSD is ready for a new low

17 cze

EUR/USD has regained buying interest and reclaimed the 1.0700 level due to renewed weakness in the US Dollar and expectations of Fed rate cuts. A continued downtrend could see EUR/USD revisit the June low of 1.0667, the May low of 1.0649, and eventually the 2024 bottom of 1.0601. On the upside, the 200-day SMA appears at 1.0788, followed by the weekly high of 1.0852, the June high of 1.0916, and the March peak of 1.0981. The US Dollar started the week weak after a strong rebound last week, driven by expectations that the Fed will implement only one rate cut this year. In this environment, EUR/USD reversed from multi-week lows near 1.0670 despite ongoing political concerns in Europe, especially in France. Market participants are assessing the Fed's hawkish stance from the June 12 meeting and rising expectations for a December rate cut. Neel Kashkari, Minneapolis Fed President, stated it is a "reasonable prediction" for the Fed to lower rates once this year, likely in December. According to the CME Group's FedWatch Tool, there is now nearly a 65% chance of a rate cut by the September 18 meeting. In the short term, the ECB's recent rate cut versus the Fed's hold has widened the policy gap, potentially weakening EUR/USD further. However, the emerging economic recovery in the Eurozone and perceived US economic slowdowns should help mitigate this disparity in the longer term, providing some support to the pair. ECB Chief Economist Philip Lane mentioned that the full impact of earlier rate hikes on Eurozone inflation is yet to be seen and that current bond market upheaval, particularly in France, is not chaotic, implying no need for ECB action. He emphasized the importance of a decline in service inflation momentum this year in supporting the ECB's disinflation narrative, with minimal new material expected before the July meeting. Lane is confident inflation will return to the 2% target next year despite some "noisy" inflation.