European Inflation, U.S. Jobs Data To Drive FX Markets
Range-Bound Trading Ahead
by Bogdan Giulvezan
The EUR/USD pair settled just a few pips below the technical level at 1.1970, which has rejected climbing prices twice in the last few days. The pair is showing signs of indecision, as price action has slowed down and long-wicked candles have appeared.
Last week’s softer than expected U.S. inflation numbers didn’t change the general opinion that a rate hike will come sooner than initially anticipated but the US Dollar took a step back and paused its assault, at least for the time being.
Key Events for the Week Ahead
In the coming week, the focus will be on European inflation data and the always important U.S. Non-Farm Payrolls. The first to come out will be the Eurozone Consumer Price Index (CPI), scheduled for Wednesday, June 30 at 9:00 am GMT and expected to show a reading of 1.9% (previous 2.0%). The indicator tracks changes in the price that consumers pay for a basket of goods and services, thus it acts as the main gauge of inflation. However, the European Central Bank has made it clear that it will not tighten monetary policy even if inflation rises, which could mean that this week’s CPI may weaken the Euro if it comes out below expectations. On the other hand, numbers above expectations may leave the single currency mostly indifferent.
Friday, July 2, the focus shifts towards the US Dollar and the Non-Farm Payrolls release. The report shows the change in the number of employed people in the U.S., excluding the farming sector, and is widely considered the most important jobs data for the American economy. The expected change is 700K (previous 559K) and higher numbers indicate economic expansion but also suggest that consumer spending will increase in the future.
Technical Outlook EUR/USD
The pair is banging on the resistance at 1.1970 but it has failed to break it thus far. Moreover, we can clearly see that the Daily candles that touch the said resistance, end up with long wicks in their upper part, which shows rejection.
Al this, combined with the recent wave of US Dollar strength, points towards a possible drop that will have 1.1850 (last week’s low) as the target, followed by the bearish trend line visible on the Daily chart below.
On the other hand, a break above the resistance at 1.1970 would likely bring in more Euro bulls, which may trigger a climb into the 50 days Moving Average (blue line on the chart). However, a lot will depend on the fundamental data released throughout the week, thus we may be in for some sideways movement, at least for the first couple of days.
