EUR/USD Ends Week with a Whimper but a Recovery Remains in Play

EUR/USD Rate, Charts and Analysis:

Read more: May jobs report: Non-farm payrolls smash estimates as US unemployment rate rises to a 7-month high

The Euro lost ground against its major G7 counterparts this week with EURGBP trading at the lows seen recently in November/Dec 2022. However, EUR/USD remained the interesting one, as the pair was on its way to close a doji candle after a sharp decline on Friday.

Nothing much has changed from an ECB perspective with ECB policy makers largely making one or two additional 25 basis point increases. This comes despite lower inflation in the eurozone this week with data seen as unlikely to influence the central bank from raising interest rates in June, which was validated by comments from ECB policymakers after Inflation version.

Most read: Eurozone inflation slows to bottom in February 2022, shows EUR/USD

The Euro made significant gains in the wake of rising inflation with the help of the US Debt Ceiling Agreement which weakened the US Dollar. However, the weakness in the US dollar was short-lived as Friday’s national non-farm payrolls and US jobs data saw expectations for a rate hike at the June Fed meeting once again to provide renewed support for the US dollar.

Next week, ISM data and the third estimate of the Euro’s GDP

Heading into the new week, we don’t have much in the way of risk events or economic data pertaining to the Eurozone. However, the biggest risk to EURUSD undoubtedly lies in the ISM Services PMI data released from the US, while we also have estimates of Eurozone GDP growth for the third time on June 8th.

Given that the US is largely dependent on the service economy and concerns about service inflation persist, the Fed may be watching the release closely. A positive reading could also re-price expectations of a hawkish Fed rate hike which could lead to further downside risks for EURUSD.

Economic calendar for the next week

The next week on the calendar slips a bit with a couple of “high” rated data releases, and a handful of “medium” rated data releases are expected.

Here are the two “rated” high risk events for the next week in the economic calendar that could affect EURUSD:

For all the economic data and events that move the market, see DailyFX calendar

artistic look

The EUR/USD weekly chart is above and we can see that the price has fallen to a major support level. The 1.0700 level is where the previous breakout took place in early March before EUR/USD climbed to its highest level since the beginning of the year. After flirting with the breakout this week, the pair is poised to close out the week on the cusp of 1.0700 again while printing a Doji candle in the process.

euro/American dollar Weekly Chart – June 2, 2023

Source: TradingView

Moving back to the daily time frame, we can see continued hesitation around the 1.0700 mark. We have now seen 6 trading days of price testing and rejection around the support level as market expectations around the US dollar and the Fed rate hike in particular continue to swing.

Breaking the key level of 1.0700 could open a retest of 1.0600 before focus shifts towards the psychological mark of 1.0500. A push higher from here has the tough task of breaking the resistance and the 100-day moving average around 1.0810. The 100 day EMA could prove stubborn as EURUSD has been stuck above the EMA since November 2022. A break of the 1.0800 handle brings focus on 1.0900 and possibly the psychological level of 1.1000. We could enter another week of range bound price action between 1.0600 and 1.0800 ahead of the central bank meetings later this month.

EUR/USD Daily chart – June 2, 2023

Source: TradingView

Written by: Zain Fouda, market writer for DailyFX.com

Connect with Zain and follow her on Twitter: @employee