EUR/USD: Bulls keep targeting 1.0600
|- EUR/USD keeps gains well past the 1.0500 mark.
- Lagarde announced a 25 bps rate hike in July.
- Lagarde suggested another raise in the policy rate in September.
EUR/USD keeps the familiar range north of the 1.0500 yardstick at the beginning of the week.
EUR/USD apathetic on Lagarde
EUR/USD clings to the positive performance amidst the generalized selling pressure around the greenback on Monday.
The pair, in the meantime, showed no meaningful reaction to the testimony of Chair Lagarde before the European Parliament. Indeed, Lagarde said the bank plans to hike the policy rate by 25 bps next month, while she also left the door open to another hike at the September event.
In addition, Lagarde declined to comment on any feature of a new ECB’s bond-buying tool, at the time when she highlighted that conditions are in place for further economic growth in the region and that the fight against fragmentation is a precondition to success of the monetary policy.
What to look for around EUR
EUR/USD keeps the recovery-mode unchanged and manage to regain the area beyond 1.0500 the figure on Monday.
The resumption of the buying bias comes in response to the offered note in the US dollar, particularly following last week’s interest rate hike by the Fed.
However, EUR/USD is still far away from exiting the woods and it is expected to remain at the mercy of dollar dynamics, geopolitical concerns and the Fed-ECB divergence, while higher German yields, persistent elevated inflation in the euro area and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.
Key events in the euro area this week: ECB Lagarde (Monday) – Flash EMU Consumer Confidence (Wednesday) – ECB General Council Meeting, Flash EMU, Germany PMIs (Thursday) – Germany IFO Business Climate (Friday).
Eminent issues on the back boiler: Fragmentation risks. Kickstart of the ECB hiking cycle in July? Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects.
EUR/USD levels to watch
So far, spot is gaining 0.29% at 1.0523 and the immediate up barrier comes at 10601 (weekly high June 15) followed by 1.0649 (55-day SMA) and finally 1.0786 (monthly high May 30). On the other hand, a break below 1.0358 (monthly low June 15) would target 1.0348 (2022 low May 13) en route to 1.0300 (psychological level).
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