EUR/USD remains under pressure after falling below 1.1400. On June 23, the pair hit a one-year low, while today it is trading around 1.1400-1.1410, in line with the daily chart.
In the short term, the euro found some support as demand for the dollar as a safe-haven asset eased amid fresh diplomatic signals between the US and Iran, but the recovery still looks cautious.
Fundamentals
The key driver for the pair remains the divergence in Fed and ECB expectations. On June 17, the Fed kept its target rate range at 3.50%-3.75% but pointed to persistent inflation. US PCE inflation rose 4.1% year-on-year in May, while core PCE increased 3.4%. The ECB, meanwhile, raised rates by 25 basis points on June 11, bringing the deposit rate to 2.25%. However, markets doubt that the regulator will be able to tighten policy aggressively given weak growth in the eurozone.
News and expectations
This week, attention is shifting to the ECB Forum in Sintra, preliminary eurozone inflation data, and US labor market statistics. If US data confirms the resilience of the economy, expectations of further Fed rate hikes may support the dollar again. For the euro, the main positive factor would be tougher ECB rhetoric and stronger market expectations of another rate hike.
Technical picture
On the daily chart, EUR/USD has broken below the important 1.1480-1.1430 support zone, which now acts as resistance. As long as the price stays below 1.1500, sellers retain the advantage. The nearest support levels are 1.1350 and 1.1300. A return above 1.1480-1.1500 would weaken the bearish scenario and could open the way toward 1.1600.
Conclusion
The baseline scenario, as noted in EUR/USD rebounds toward 1.1400, but trend remains under pressure, remains cautiously negative for EUR/USD. The pair has stabilized near 1.14, but a full reversal would require strong signals from the ECB or weaker US data. For now, as markets price in a more hawkish Fed and a technically broken support zone, euro gains are better viewed as corrective.
Latest EUR/USD News
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