Today we shall take a look at the EUR/USD currency pair. At the very beginning of the month, the euro faced a moment of doubt and dropped to its lowest level in three weeks but right now it seems to have stabilized and may even recover.
The euro is likely to trade in a subdued manner in the days approaching the June monetary policy meeting of the European Central Bank. The ECB meets this Thursday and investors will be keen to hear the bank’s inflation projections, as well as any hints that it may be considering reducing its asset purchases to prevent the economy from overheating. However, the ECB and especially its President Christine Lagarde dislike speaking on this topic because even the smallest suggestion of hawkishness tends to cause an increase in bond yields and make the euro stronger, which in turn can hurt the economic recovery of the EU. Recall that last year the ECB stated that the euro above 1.20 is undesirable to them, and the single currency has been consistently trading above that level even without hints about hawkish policies anytime soon. Thus, we expect the rhetoric of the ECB to be extremely careful, but the euro might still strengthen quietly in the background.
Moreover, the US dollar is experiencing a bit of weakness at the moment. Friday’s non-farm payrolls once again disappointed investors by failing to meet the target of 650K, despite improvements in the unemployment rate. It is worth noting that the difference between the actual result and the forecast was not as dramatic as it was in April, though some of that is also due to a considerably lower forecast in May, on account of the poor results in the previous month. Still, this indicates that the US economic recovery is not happening as fast as some feared, and that the Federal Reserve is correct in its cautious dovishness. Disappointments on the US labor market will translate into a reality where the Fed is not under any pressure to tighten its monetary policy, which in turn keeps the dollar weaker than usual.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2166, with the price currently trading slightly above it. The daily support levels lie at 1.2162 and 1.2158. The daily resistances are located at 1.2170 and 1.2174. The indicators of technical analysis strongly agree in recommending a sell position today.
