EUR/USD Outlook: June Opening Range Intact For Now

EUR/USD Outlook

EUR/USD consolidates following the limited reaction to the better-than-expected US Non-Farm Payrolls (NFP) report, but the exchange rate may struggle to retain the rebound from the May low (1.0635) if it fails to defend the monthly opening range.

EUR/USD Outlook: June Opening Range Intact For Now

EUR/USD also seems to be unfazed by the recent remarks from European Central Bank (ECB) President Christine Lagarde as it trades in a narrow range, and the exchange rate continue to track sideways during the Federal Reserve’s ‘blackout period’ as it struggles to trade back above the April low (1.0788).

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Recent remarks from President Lagarde suggest the ECB will further combat inflation as the head of the central bank tells European lawmakers that ‘our future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium-term target.’

As a result, the ECB may vote for another 25bp rate hike at the next meeting on June 15 as President Lagarde pledges to retain a restrictive policy ‘as long as necessary,’ but the recent update to the Euro Area’s Consumer Price Index (CPI) may push the Governing Council to adopt a wait-and-see approach as the headline reading for inflation slipped to 6.1% in May from 7.0% the month prior. 

Source: CME

Until then, speculation surrounding US monetary policy may sway EUR/USD as the CME FedWatch Tool no longer reflects expectations for another rate hike, with market participants currently pricing a greater than 60% probability of seeing Chairman Jerome Powell and Co. keep the Fed Funds rate on hold.

With that said, EUR/USD may hold within the monthly opening range ahead of the Federal Open Market Committee (FOMC) rate decision on June 14 especially as the central bank is slated to update the Summary of Economic Projections (SEP), but the exchange rate may snap the range bound price action if it fails to defend the June low (1.0662).

Euro Price Chart – EUR/USD Daily

Chart Prepared by David Song, Strategist; EUR/USD on TradingView

• EUR/USD is little changed from the start of the week as it consolidates within the opening range for June, and the exchange rate may attempt to retrace the decline from last month as long as it holds above the May low (1.0635).
• A close above 1.0730 (23.6% Fibonacci retracement) may lead to a test of the monthly high (1.0779), with the next area of interest coming in around 1.0880 (23.6% Fibonacci extension) to 1.0940 (50% Fibonacci retracement), which incorporates the 50-Day SMA (1.0890).
• Will keep a close eye on the moving average as it no longer reflects a positive slope, and failure to close above 1.0730 (23.6% Fibonacci retracement) may undermine the range bound price action in EUR/USD.
• In turn, EUR/USD may struggle to retain the rebound from the May low (1.0635) if it fails to defend the monthly opening range, with a break/close below 1.0610 (38.2% Fibonacci retracement) bringing the March low (1.0516) on the radar.

Additional Market Outlooks 

AUD/USD Susceptible to Failed Test of 50-Day SMA

Gold Price Rebound Brings Test of 50-Day SMA

--- Written by David Song, Strategist

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