The pair experienced a notable rally yesterday but failed to hold its peak, closing at 1.0732 today. The initial gains were boosted by the initial results of the French parliamentary elections, which did not reflect the worst-case scenario, causing a temporary increase in risk appetite and strengthening the euro.
However, overnight economic indicators in the US offered a mixed picture, dampening the initial enthusiasm. The ISM manufacturing index for June fell to 48.5 from 48.7, below expectations and below the key 50-point mark that separates expansion from contraction. In contrast, Markit's manufacturing PMI indicated a slight improvement, rising to 51.6 from 51.3.
Additionally, a report showed a 0.1% month-over-month decline in U.S. construction spending in May, a reversal of the previous 0.3% increase and weaker than anticipated, suggesting a possible slowdown in the construction sector and broader economic support.
Market participants are now turning their attention to the upcoming speech by Federal Reserve Chairman Jerome Powell for further clues on the direction of US monetary policy.
EUR/USD Technical Analysis
The EUR/USD pair completed a correction to 1.0774 but is now forming a downward wave towards 1.0675. If this level is reached, a minor correction to 1.0714 could occur before a possible further decline to 1.0630, which could extend to 1.0573. The MACD indicator underlines this bearish outlook with its signal line located below zero and the histograms trending downwards.
On the hourly chart, the pair is currently forming a bearish structure with an initial target at 1.0675. After this, a correction towards 1.0714 is plausible, before a continuation of the downtrend towards 1.0640. The Stochastic oscillator corroborates this view, with its signal line approaching the 20 level, indicating a potential for further declines before a rebound towards 50 can occur.
Market outlook
Investors will continue to evaluate the mix of economic data and signals from central banks, particularly the Federal Reserve, to assess the likely path of interest rates and their impact on currency valuations. Today's speech by Jerome Powell could be particularly decisive in determining market expectations going forward.
By RoboForex Analysis Department
Disclaimer
The forecasts contained in this document are based on the personal opinion of the author. This analysis cannot be considered as trading advice. RoboForex does not assume any responsibility for trading results based on trading recommendations and reviews contained herein.
