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EUR/USD jumped to the resistance level of 1.0767 at the time of writing this analysis. The euro's gains came in line with expectations as Marine Le Pen's National Rally party took the lead in the first round of early parliamentary elections in France. However, polls suggest the far-right party is ahead by a smaller margin than expected, and the outcome remains largely uncertain ahead of next week's runoff. On the economic front, investors will assess PMI manufacturing figures from across the region and German inflation data for June.
Before that, according to reliable trading platforms, the euro fell to around $1.0685, near its lowest level in two months, as investors adjusted their expectations for further easing in the European Central Bank's policy after the consumer price index numbers. According to the economic calendar results, preliminary data showed that the unified annual inflation rate in France slowed to 2.5%, as expected, while the rate in Spain fell to 3.5%, slightly above expectations. In contrast, the inflation rate in Italy accelerated to 0.9%, as expected, from 0.8%. At the same time, consumers in the eurozone continued to lower their inflation expectations became more optimistic about the employment prospects, according to a survey conducted by the European Central Bank.
Earlier last week, ECB Governing Council member Olli Rehn suggested the possibility of two additional interest rate cuts this year. In addition, investors are concerned about the expected success of the far-right National Rally party led by Marine Le Pen in the French parliamentary elections on Sunday.
In contrast, the US Dollar Index (DXY) was hovering around 105.9 on Friday after US personal consumption expenditures (PCE) inflation came in line with expectations and pointed to easing price pressures, bolstering the Federal Reserve's case for lowering borrowing costs this year. According to the report, core PCE prices rose 0.1% from the previous month, the smallest increase in six months, while the annual rate fell to 2.6%, the lowest since early 2021.
Consequently, the probability of a rate cut by September increased to 66% from 64% before the crisis. Also, the odds of a rate cut by November rose to 78% from 76% and to 95% from 94% by December. Meanwhile, the US presidential debate, where Donald Trump was seen as the winner, also supported the greenback early in the session, as his policies could add to inflationary pressures. Recently, the US dollar is on track to end June up about 1.2%, and the second quarter is stronger by 1.3%, as the US Federal Reserve lags other major central banks in its easing policy.
On the stock trading platforms, US stocks closed lower in the final trading session of June, as investors digested a batch of economic data. The S&P lost 0.4% after hitting a new high of 5.5K, and the Nasdaq 100 fell 0.7% after briefly hitting a record high in 19980. Meanwhile, the Dow Jones Industrial Average fell 41 points. Moreover, the new data showed that the Fed's preferred measure of US inflation was almost unchanged in May, paving the way for the Fed to cut US interest rates this year. Meanwhile, consumer sentiment in Michigan was revised sharply higher and inflation expectations were lower than previously reported.
Furthermore, Telecom stocks led the decline with Alphabet (-1.7%), Meta (-2.9%), Netflix (-1.4%) and Walt Disney (-2.8%) falling. Conversely, energy and real estate stocks posted small gains. Most major companies closed in the red, including Nvidia (-0.3%) and Amazon (-2.3%).
For the month, the S&P 500 gained 2.9%, the Dow Jones rose 0.7% and the Nasdaq rose 4.9%. In the first half of 2024, the S&P added 15.1%, the Nasdaq added 20% and the Dow added 3.7%.
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EUR/USD Technical analysis and forecast:
The Euro against the US Dollar EUR/USD did not get out of the general downward trend path. It may breach the current trend with bulls moving the currency pair towards the resistance levels of 1.0830 and 1.0910 respectively. On the other hand, according to the performance on the daily chart, the support of 1.0690 will remain the most important for the strength of bears' control and thus prepare for stronger losses. This week, the Euro Dollar price will react to the results of the French elections, then the announcement of inflation figures in the Eurozone. Statements by both Lagarde and Jerome Powell, then the announcement of US employment figures.
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