EUR/USD analysis: FOMC hints rate hike for June

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1685

EU May preliminary Markit PMI softened for a fourth consecutive month.
Chances of a US rate hike for June increased after FOMC's optimistic words.

The dollar retook the market's lead and advanced against most of its major rivals, reaching fresh multi-month highs against the GBP and the EUR, as risk-off dominated the financial world, while the mentioned currencies suffered from own data woes. The clear exemption was, of course, the safe-haven yen. The common currency was undermined by another round of softer-than-expected Markit PMI figures, as the preliminary May indexes for the region indicated that business activity slowed for a fourth consecutive month, and stands at its lowest in a year and a half. For the whole EU, the Manufacturing index printed 54.5 from the previous 56.2, while for the services sector, the index shrunk to 55.5 from 56.2 in April. Additionally, Consumer Confidence in the EU fell to 0.2 in May, below the previous 0.3 and the expected 0.4. In the US, New Home Sales fell by less-than-expected in April, down by 1.5%, while the May preliminary Markit PMI surprised to the upside, with business activity picking up to its highest in three months. The FOMC Meeting's Minutes released mid-US afternoon showed that officers are confident that the next rate hike will likely be "soon" and that a modest "overshoot" on inflation could be "helpful."

Thursday's macroeconomic calendar will include the German GFK Consumer Confidence survey, and Q1 GDP, and US weekly unemployment claims report alongside with Existing Home Sales and the Kansas Fed Manufacturing index for May.

The EUR/USD pair extended its decline post-FOMC's Minutes, heading into the Asian opening below the 1.1700 figure, and poised to extend its decline according to intraday technical readings, as in the 4 hours chart, the pair is back below its 20 SMA after a false bullish breakout earlier this week. Technical indicators in the mentioned chart have accelerated south below their midlines, with the RSI currently nearing oversold readings. The pair has a strong static mid-term support at 1.1660, and a break below it should lead to a steeper slide regardless oversold conditions.

Support levels: 1.1660 1.1620 1.1590

Resistance levels: 1.1720 1.1750 1.1785

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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