It started the week trading around 1.1381. The US dollar has maintained its strong position following the hawkish outcome of the Federal Reserve's June meeting. Updated projections from FOMC members confirmed the central bank's willingness to continue tightening monetary policy, prompting markets to reassess the outlook for interest rates. The probability of a rate hike in July is currently estimated at around 29%, while the probability of a September adjustment has risen to approximately 60%.
However, in recent days expectations have become slightly less aggressive. One of the reasons has been the sharp drop in , which has returned to pre-conflict levels, seen before the escalation in the Middle East. Lower oil prices have helped reduce inflation concerns. Additionally, markets have largely priced in the Federal Reserve's hawkish stance. Therefore, further appreciation of the US dollar is likely to require further support from strong macroeconomic data, particularly employment and inflation data.
Until the release of these key reports, the dollar is expected to remain well supported. However, in the absence of new catalysts, a period of consolidation or moderate correction cannot be ruled out. Market attention in the coming days will focus on labor market and inflation data, which will play a crucial role in shaping expectations for future Federal Reserve policy.
The outlook for the euro remains less favorable. Although the European Central Bank continues to adopt a restrictive trend, much of the expected policy adjustment has already been priced into the market. Investors currently expect around 28 basis points of additional tightening by the end of the year, and the ECB's next rate hike is not expected to come before September.
The latest preliminary PMI data confirmed a further easing of inflation pressures in the euro area, with price growth slowing to its lowest level since February. While business activity remains subdued, the pace of economic decline appears to have stabilized. An additional positive sign came from a recent ECB survey, which showed that consumers expect inflation to decline over the next 12 months and anticipate an improvement in economic conditions. While this supports the euro's long-term prospects, the short-term advantage remains firmly in the hands of the US dollar.
Technical analysis
On the H4 chart, EUR/USD is trading within a consolidation range around 1.1405. The range currently extends between 1.1378 and 1.1414. An upside break could trigger a corrective move towards 1.1470, followed by a possible drop to 1.1385. On the contrary, a break lower would open the way for a move towards 1.1315.
The MACD indicator supports the bearish scenario, with its signal line below zero and pointing firmly downwards, reflecting persistent negative momentum.
On the first half chart, EUR/USD has reached the level of 1.1414 and is now consolidating below this level. In the short term, the range could extend between 1.1369 and 1.1317, with further downside potential towards 1.1260.
The stochastic oscillator confirms this perspective. Its signal line is currently near 80 and is declining sharply towards 20, indicating weakening bullish momentum and increasing downward pressure.
Conclusion
EUR/USD remains under pressure as the Federal Reserve's hawkish stance continues to support the US dollar. While falling oil prices and stabilizing eurozone data have eased some concerns, investors remain focused on the upcoming U.S. jobs and inflation reports. Unless this data disappoints significantly, the dollar is likely to maintain its advantage in the near term.
By RoboForex Analysis Department
Disclaimer:
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
