- ECB minutes show some members want to keep the door open to a larger increase in July.
- Markets hold onto gains, S&P 500 up by 1.09%.
- EUR/USD heads for lowest daily close since December 11, 2002.
The EUR/USD failed to hold onto daily gain and fell to test the 1.0160 area. A weaker euro pushed the pair to the downside despite a recovery in equity prices.
The immediate support is the 1.0160 area and a break lower would expose 1.0120. On an intraday basis, a recovery above 1.0190 should help the euro return to 1.0200. The next resistance levels are located at 1.0220 followed by 1.0235.
EUR/USD unable to recover
Despite the improvement in market sentiment, that continues to be among the weakest currencies and facing forecasts of a slide to parity in EUR/USD. Doubts about the anti-fragmentation instrument weigh on the euro. The US Dollar Index is falling marginally hovering around 107.00.
US yields are higher supporting the greenback. The US 10-year yield stands at 2.99%, and the 30-year at 3.17%. The Dow Jones rises by 0.95% and the S&P 500 gains 1.22%.
The European Central Bank released the minutes from its latest meeting. According to economists at Commerzbank, the document revealed strong discontent among members regarding the inflation outlook. “Given the reasoning of Council members at the June meeting, a 50 basis point increase in policy rates cannot be ruled out at the upcoming July meeting. We are sticking to 25 basis points in our baseline scenario mainly because a majority of recent statements by Council members still signals this.”
In the US, economic data showed an increase in Initial Jobless Claims and a narrower trade deficit in May. The numbers were ignored by market participants. On Friday, the official employment report is due. Market consensus is for an increase of 270K in jobs and the unemployment rate to remain at 3.6%. “Recession has dominated market psychology. A stronger payrolls report will challenge the risk of that near-term. We look for this to add to USD resilience particularly with EURUSD inevitably en route to parity,” said analysts at TD Securities.
Technical levels
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