Key Takeaways:
- French Election Results: Marine Le Pen’s National Rally party won the first round, providing a boost to the Euro.
- US Fed Rate Cut Speculation: Rising bets for a September rate cut by the Fed have weakened the US Dollar, supporting EUR/USD.
- Technical Levels: Key resistance is at 1.0755-60 and 1.0815, while support levels are at 1.0720 and 1.0700.
- Economic Data Focus: US NFP report and Eurozone inflation figures will be critical in shaping market expectations and influencing the pair’s direction.
Market Dynamics and Recent Performance
The EUR/USD pair gained traction following last week’s rebound from the 1.0665 region, lifting to the 1.0760 area, the highest in two weeks. This upward movement was fueled by a combination of factors including the results of France’s snap elections and market speculation around the Federal Reserve’s monetary policy. The exit polls from France showed that Marine Le Pen’s far-right National Rally won the first round by a smaller margin than projected, providing a lift to the Euro. Concurrently, rising bets for a September rate cut by the Fed weakened the US Dollar, further supporting the EUR/USD pair.
Technical and Fundamental Influences
Technically, the EUR/USD pair shows bullish prospects as it has moved beyond the 100-period Simple Moving Average (SMA) on the 4-hour chart. Positive oscillators support the view for additional gains. The key level to watch is the 50% Fibonacci retracement of the 1.0910-1.0666 downfall, around the 1.0755-60 area. A sustained move above this level could push the pair towards the 1.0800 mark and further to the 1.0815 region, marking the 61.8% Fibonacci level. On the downside, the 1.0720 region and the 1.0700 mark serve as immediate supports, with a break below these levels potentially exposing the 1.0665 area.
Fundamentally, the focus is on several key events. The upcoming US Non-Farm Payrolls (NFP) report and Eurozone inflation figures are critical. Preliminary Eurozone inflation figures will be released on Tuesday, and any unexpected increase could shift investor expectations regarding the European Central Bank’s (ECB) rate cut trajectory. On the US side, strong employment data could reinforce the Fed’s cautious stance on rate cuts, thereby supporting the US Dollar. The French election results and sentiment towards the July 7 run-off will also play a role in influencing the EUR/USD pair.
Looking Forward
Looking ahead, the EUR/USD pair’s performance will be shaped by several key economic releases and events. The US NFP report is expected to provide significant insights into the health of the US labor market and the potential direction of Fed policy. Similarly, Eurozone inflation data will be crucial in shaping expectations for ECB actions. Additionally, the outcome of the French elections and the sentiment surrounding the run-off will be closely monitored. Market participants will also pay attention to ECB commentary and the ECB monetary policy meeting minutes.
