EUR/USD trades flat at 1.1476 after a slight climb past 1.15. The Fed held rates, while Middle East tensions and Trump’s comments boosted the Dollar, limiting the Euro’s advance.
The Fed held rates at 4.25%–4.50%, noting solid economic expansion and strong labor. They’ll continue reducing Treasury holdings and monitor risks. Officials revised GDP downward, barely changed the unemployment rate, and expected slightly higher inflation. Two rate cuts are seen by year-end. Meanwhile, President Trump expressed openness to meeting Iran, and Fed Chair Powell maintained a neutral stance, ready to respond to external shocks.
Eurozone inflation hit the ECB’s target in May. However, ECB officials like Mario Centeno and Fabio Panetta view the EU economy’s fragility as a greater concern, suggesting inconsistency with the 2% inflation target. This may lead to further ECB rate cuts, despite most officials favoring a pause in easing.
EUR/USD declines as the Fed appears set for two rate cuts
EUR/USD extended losses as Trump opened the door for Iran talks and Fed Chair Powell signaled stable rates. Powell stated tariffs would weigh on economic activity and push up inflation, but stable rates are appropriate with a strong labor market and falling inflation. US Initial Jobless Claims rose by 245,000, matching expectations, while Continuing Claims fell. The housing sector cooled in May, with Housing Starts down 9.8% MoM and Building Permits down 2%. EU HICP in May rose 1.9% YoY (expected), down from April’s 2.2%, with Core HICP at 2.3% YoY (expected). Rising oil prices from the Middle East conflict could trigger an inflation spiral, prompting hawkish central banks. Financial markets do not expect an ECB rate cut in July.
EUR/USD Technical Outlook
EUR/USD maintains an uptrend as long as it remains above the 20-day Simple Moving Average (SMA) at 1.1493. The price action exhibits a consistent pattern of higher highs and higher lows, indicating potential for further appreciation.
For the continuation of a bullish trend, the pair must decisively breach 1.15 and the June 17 high of 1.1578. Should this level be surpassed, subsequent targets are 1.16, followed by the yearly high of 1.1631.
Conversely, a daily close below 1.15 would likely precipitate a test of 1.1450. Subsequent key support levels would be the 20-day SMA at 1.1419, and then 1.14.
