EUR/USD begins the week edging up above last week’s high and is approaching the June high at 1.3676. The 4H chart shows that EUR/USD’s price range in June has been between 1.3505 and 1.3676, and was established during the June 5 – 6 session. This month-long consolidation action stalls a month-long downtrend from almost 1.40. The ability to break above 1.3680 would revive a bullish outlook and put focus again on that 2014-high just below 1.40.
(eurusd 4h chart, 6/30)
1.3575 – 1.36 is the central pivot area for June’s range. Let’s say there is a break above that June high. If the market is to stay bullish and wants to extend into a bullish correction in July, it should hold above 1.36 on a pullback. A break below 1.3575 however would open up a bearish continuation scenario, and puts the 1.3505, and the 2014-low of 1.3476 in sight.
When you look at the daily chart you see that a test of June’s high would also be a test of the 200-day simple moving average. If price can hold below the 200-day SMA this week when its all said and done, EUR/USD is likely bearish, and the focus will remain on the June and 2014-lows.
(eurusd daily chart, 6/30)
CPI Steadily Low at 0.5%
During the 6/30 European session, the flash estimate of the Euro Area’s CPI in June came in at 0.5%, same as the reading in May. Economists forecast a slight rise to 0.6%. Draghi has said a couple of months ago that inflation should be bottoming and looking up for the second half of the year. So far, we have not seen a rebound, but the CPI remains at the 0.5% low, the lowest since November 2009.
A future reading below 0.5% will put the pressure on Draghi and the ECB to act. However If the annual inflation rate can push above 0.7%, we would finally start seeing evidence of inflation bottoming, in which case, the chances of QE be diminished.
ECB Expected to Hold
With inflation staying at 0.5%, the ECB doesn’t have extra reason for further stimulus. It is likely to wait for the previous rate cut to work itself in. The ECB will be meeting on Thursday and will hold a press conference like always, but we are likely to see a lot of reiterations instead of new action.
NFP on Thursday:
Looking ahead, just be aware that Friday is 7/4 and is a bank holiday in the US. The Non-Farm payroll release which is usually slated for the first Friday of the week will be given on Thursday (7/3).
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