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17 Jun 2021

EUR/USD stays depressed around 1.1930, dollar extends the rally

  • EUR/USD appears stabilized in the 1.1930 region so far.
  • The dollar extends the post-FOMC rally to fresh tops.
  • US Claims, Philly Index surprised to the downside.

The selloff in the European currency stays unabated, with EUR/USD hovering around the lower end of the range in the mid-1.1900s so far on Thursday.

EUR/USD weaker on USD-buying

EUR/USD accelerates the losses and clinched new 2-month lows in the 1.1930/25 band, where it is now looking to consolidate.

The sharp rebound in the greenback follows the unexpected upbeat message from the FOMC event late on Wednesday, where the Committee opened the door to interest rate hikes in H2 2023.

Earlier in the session, final May inflation figures in Euroland showed the headline CPI rose 2.0% and the Core gauge rose 1.0% on a year to May.

In the US data space, Initial Claims rose by 412K from a week earlier while the Philly Fed index eased a tad to 30.7 for the current month, both prints coming in short of expectations.

What to look for around EUR

EUR/USD plummets to fresh levels well south of the 1.2000 mark on Thursday, always in response to the investors’ shift to the greenback, exclusively following the FOMC event on Wednesday. In the meantime, support for the European currency comes in the form of auspicious results from fundamentals in the bloc coupled with higher morale, prospects of a strong rebound in the economic activity and the investors’ appetite for riskier assets.

Key events in the euro area this week: Final May Core CPI (Thursday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities.

EUR/USD levels to watch

So far, spot is losing 0.53% at 1.1930 and a breakdown of 1.1926 (monthly low Jun.17) would target 1.1887 (61.80% Fibo retracement of the November-January rally) en route to 1.1835 (low Mar.9). On the flip side, the next hurdle lines up at 1.2037 (100-day SMA) followed by 1.2064 (38.2% Fibo retracement of the November-January rally) and finally 1.2101 (weekly high Jun.15).

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