Although the euro has regained some of its recent losses against certain currencies, it would be premature to interpret this rebound as the beginning of a significant increase for the euro.
The Euro (EUR) has experienced an increase in value compared to other currencies in June due to the European Central Bank’s (ECB) decision to raise interest rates and oversold market conditions. However, the potential for further increase in EUR seems to be restricted, especially when compared to the US Dollar (USD), unless there is an improvement in macroeconomic data within the Eurozone or disappointing jobs data from the United States.
The data released on Monday indicated that manufacturing activity in the Euro area declined at a faster pace than previously estimated in June. Additionally, the US ISM manufacturing PMI reached its lowest level since mid-2020. Nevertheless, when considering manufacturing activity figures beyond the beginning of the month, US macro data have generally exceeded expectations, as evidenced by the economic surprise index. A disappointing macroeconomic data set in the Euro area, on the other hand, gives the USD a comparative growth advantage.
It is anticipated that the number of US non-farm payrolls will have increased by 225k in June, a decrease from the 339k growth observed in May. However, it is expected that the unemployment rate will have slightly decreased from 3.7% to 3.6%. If the jobs data surpasses expectations, it could solidify the anticipation of a rate hike by the Federal Reserve later this month and limit any potential upward movement for EUR/USD. Currently, rate futures are implying a 90% probability of a 25-basis point hike on July 26.
EUR/USD Weekly Chart
EUR/USD: Broader upward bias unchanged
In terms of technical analysis, the EUR/USD currency pair is currently experiencing an overall upward trend. However, there is a possibility for further extension in the range of price action. The upper limit of this range is indicated by the May high of 1.1100, whereas the lower limit is represented by a horizontal trendline from January, approximately at 1.0480. In order to alleviate the overall upward pressure, it would be necessary for the currency pair to break below the level of 1.0480.
EUR/GBP Daily Chart
EUR/GBP: Upside capped
EUR/GBP has experienced a rebound after being in oversold conditions. The upward movement of the currency pair could be limited due to strong resistance at the mid-May low of 0.8660, which also aligns with the 89-day moving average. Conversely, if there is a significant decline below 0.8545, it may lead to a further decrease towards the August low of 0.8340.
EUR/AUD Daily Chart
EUR/AUD: Due for a retreat?
The EUR/AUD currency pair experienced a recovery after approaching a significant level of support represented by the 200-day moving average. Nevertheless, the currency pair has encountered a strong resistance at the high recorded in late May, specifically at 1.6515. This situation suggests a potential reversal in direction, with the possibility of a downward movement towards the 200-day moving average, currently situated around 1.5850.