EURUSD now needs to hold above the 1.0700 figure in order to stay afloat in the near term
The euro turned lower on Tuesday following three days of gains as the dollar proceeded to recovery across the market. EURUSD briefly climbed to 1.0785 at the start of the week but failed to preserve the upside momentum and slipped back to the 1.0730 zone today.
The common currency struggled to derive support from ECB’s contradictory signals. In particular, Visco said that rate hikes will have to be gradual given economic uncertainties. On the other hand, Villeroy noted that May inflation figures confirm their expectations for an increase and need for progressive monetary normalization. Of note, Eurozone’s May preliminary CPI came in at +8.1% versus +7.7% y/y expected. Core inflation came in higher than expected as well, suggesting the central bank could prefer a more aggressive approach towards tightening.
As for other data, Germany’s seasonally adjusted unemployment rate in May stayed unchanged at 5%, in line with expectation. The euro shrugged off the release, with focus shifting towards Friday’s US NFP employment report that will set fresh tone for USD pairs.
EURUSD now needs to hold above the 1.0700 figure in order to stay afloat in the near term. It looks like the European currency could struggle for some time before resuming the ascent if risk-on tone reemerges after a pause. So far, risk demand looks indecisive after a positive start to the week.
As for the dollar itself, the USD index is treading water in the 101.70-101.80 zone on Tuesday, off late-April lows seen around 101.30 at the start of the week. The immediate upside target now arrives at 102.00, followed by the 102.30 intermediate barrier. On the positive side, the greenback stays above the 101.00 figure that represents an obstacle on the way towards the 100.00 psychological level last seen on April 24.