EUR/USD eases from highs with Fed Powell and US data on tap

The Euro extends gains for the tenth day, supported by upbeat Eurozone.
A mix of trade uncertainty, US debt concerns, and bets on Fed rate cuts is hammering the US Dollar.
EUR/USD has reached overbought levels at 1.1800, a correction looks likely.

Guillermo Alcala FXStreet

The EUR/USD pair keeps marching higher for the tenth consecutive day. The pair is trading with minor gains around the 1.1800 level at the moment of writing on Tuesday, ahead of the Fed Chairman's speech on the central bankers' meeting in Sintra, Portugal and US Manufacturing and Job Openings figures.

The common currency appreciated earlier today, fuelled by an unexpected improvement in the Eurozone preliminary HCOB Manufacturing PMI and better-than-expected German Unemployment figures, while June's Consumer Prices Index (CPI) remained fairly steady.

The Greenback remains on the defensive, hit by a mix of concerns about the chaotic US trade policy, mounting fears about the country's fiscal debt, and rising expectations that the Federal Reserve (Fed) will cut interest rates at least twice before the end of the year.

In the trade domain, optimism about Monday's rare earths deal between the US and China has been offset by US President Donald Trump's complaints about the discussions with Japan and US Treasury Secretary Scott Bessent's threats of higher tariffs.

Moreover, uncertainty about Trump's sweeping tax bill, which is struggling to make its way through the Senate, amid divisions within the republican party about its impact on the US fiscal debt, is adding pressure on the US Dollar.

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.24%	-0.22%	-0.84%	-0.01%	-0.10%	-0.32%	-0.54%
EUR	0.24%		0.02%	-0.71%	0.24%	0.22%	-0.10%	-0.29%
GBP	0.22%	-0.02%		-0.61%	0.24%	0.21%	-0.11%	-0.30%
JPY	0.84%	0.71%	0.61%		0.89%	0.74%	0.51%	0.32%
CAD	0.01%	-0.24%	-0.24%	-0.89%		-0.11%	-0.34%	-0.54%
AUD	0.10%	-0.22%	-0.21%	-0.74%	0.11%		-0.32%	-0.52%
NZD	0.32%	0.10%	0.11%	-0.51%	0.34%	0.32%		-0.20%
CHF	0.54%	0.29%	0.30%	-0.32%	0.54%	0.52%	0.20%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Daily digest market movers: The US Dollar extends losses as US fiscal worries return

With geopolitical tensions in the rearview mirror, concerns about Trump's Tax Bill, which is expected to add $3.3 trillion to the US fiscal debt load, have returned to the market. Fears of a debt crisis are eroding the idea of US exceptionalism and adding weight to the US Dollar.
Eurozone manufacturing activity improved somewhat in June, with the PMI edging up to 49.5 from the previous month's 49.4 reading. These figures are still consistent with a contracting trend, but they beat expectations of a steady 49.4 level and mark their highest level in the last three years.
German unemployment increased by 11K in June, below the 15K expected, and well below May's 34K increment. The jobless rate has remained steady at 6.3% against expectations of an increase to 6.4%.
Preliminary Eurozone Consumer Prices Index (CPI) figures for June have confirmed steady inflation figures with prices ticking up to 2% year-on-year, from 1.9%, and the core inflation steady at 2.3% with both CPI readings flat on the month, broadly meeting market expectations.
Trump has expressed his frustration about the trade talks with Japan, and Treasury Secretary Bessent warned that the US might introduce higher tariffs on July 9 despite ongoing negotiations.
Regarding monetary policy, the US president has continued hammering the Fed Chair Powell, affirming that the US rate should be between Japan's 0.5% and Denmark's 1.75%. These comments raise questions about the independence of the central bank and undermine the US Dollar's status as the world's reserve currency.
These attacks, along with the soft macroeconomic figures seen recently, have boosted investors' expectations of Fed rate cuts for the rest of the year. The CME Group's Fed Watch Tool shows a 20% chance of a rate cut in July, but a rate cut of at least 25 basis points (bps)in September is nearly fully priced.
Tuesday's focus will be on the Central Bankers Summit in Sintra, Portugal, where the chiefs of the world's major central banks will speak about trade, the global economic outlook, and inflation, and might give hints about their rate paths.
In Europe, the Preliminary Eurozone Consumer Prices Index (CPI) data from June will attract attention. Consumer inflation is expected to have remained steady, following cooler-than-expected CPI readings in Italy and Germany on Monday.
In the US, the ISM Manufacturing PMI and the JOLTS Job Openings, together with Powell's speech at the Sinttra summit, are expected to provide further clues about the bank's rate cut calendar.

EUR/USD reaches overbought levels above 1.1800

EUR/USD trades slightly down, with the 4-hour Relative Strength Index (RSI 14) showing overbought levels as the pair extends above the 1.1800 area. This is often a sign of an upcoming corrective reaction.

On the downside, the previous high at 1.1750 (June 26 and 27 highs), is likely to provide some support to a stron

ger bearish reaction, ahead of the June 27 low at 1.1680

On the upside, above 1.1800 the 261.8% Fibonacci extension level of the June 26.30 trading range is at 1.1850, a plausible bullish target for today.

Economic Indicator

Fed's Chair Powell speech

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.

Economic Indicator

ISM Manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The indicator is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.

Why it matters to traders?

The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) provides a reliable outlook on the state of the US manufacturing sector. A reading above 50 suggests that the business activity expanded during the survey period and vice versa. PMIs are considered to be leading indicators and could signal a shift in the economic cycle. Stronger-than-expected prints usually have a positive impact on the USD. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are watched closely as they shine a light on the labour market and inflation.

Economic Indicator

JOLTS Job Openings

JOLTS Job Openings is a survey done by the US Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month.

AUD/USD holds above 0.6950 as bullish USD caps gains

AUD/USD edges lower during the Asian session on Tuesday, stalling a two-day recovery move from a two-month low, touched last week. An extended rout in the fixed income market keeps US bond yields elevated near multi-year highs. This, along with geopolitical uncertainties, helps the US Dollar retain its bullish tone despite receding October Fed hike bets. However, expectations for another RBA rate hike this month could act as a tailwind for the Aussie.

USD/JPY rises back above 158.00 despite hawkish BoJ outlook

USD/JPY rises back above 158.00 in the early European morning on Tuesday. The pair strengthens as the Japanese Yen fails to find any inspiration from hawkish BoJ expectations and looming intervention risks. Meanwhile, geopolitical uncertainty and elevated US bond yields keep the US Dollar near its YTD high despite receding October Fed hike bets. This, in turn, helps the pair stay supported.

Gold recovers further from two-month low amid some USD profit-taking

Gold builds on its modest intraday bounce from the $4,100 neighborhood, or a two-month low, and climbs above $4,150 during the first half of the European session. The US Dollar pauses for a breather following the recent strong rally from the September monthly swing low and offers some support to the precious metal. Adding to this, receding bets on an October Fed rate hike benefit the non-yielding bullion.

Ripple and Stellar weaken as derivatives positioning fades

Ripple (XRP) and Stellar (XLM) face pressure trading below $1.499 and $0.220, respectively, on Tuesday after a modest correction at the start of the week. Traders should be cautious as weakening derivatives metrics and fading bullish momentum suggest further corrections for XRP and XLM. Derivatives data shows a weakening and cautious signal among traders.

Europe in focus as French and Spanish politics drive sentiment

There are no tier-1 releases today. Focus will remain on developments in the European markets and geopolitical developments in the Middle East. In France, the key issue in the coming days will be whether the Socialists and Marine Le Pen's National Rally signal they are willing to topple the government over the budget.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.