Impact of economic weakness on EURUSD pair

The euro came under pressure in the first half of Wednesday’s session, ahead of France’s snap elections and due to growing signs of weakness in the German economy. This political uncertainty has strengthened the US dollar, especially against currencies where the central bank is more pessimistic or where interest rates are much lower than the US – for example the Japanese yen. In fact, we just saw a new multi-decade high for the USD/JPY pair today after it broke through The highest level of 160.21 recorded in April. However, in terms of the EUR/USD forecast, it is still bearish at the moment. With the EUR/USD pair falling below 1.07 today, and Germany’s DAX giving up previous gains, these moves confirm the shared concerns among equity and forex investors alike.

Recent data from Germany suggests that the economic recovery from last year’s recession is slowing, which could prompt the ECB to cut interest rates again. The GFK Consumer Confidence Index unexpectedly fell to -21.6 in June, down from the revised reading of -21 in May, contrary to expectations for a slight improvement to -18.9. The decline follows weaker-than-expected results from Germany’s business climate index and disappointing PMI data. From last weekend.

Although the ECB cut interest rates by 25 basis points in June, it was reluctant to commit to further rate cuts due to concerns about a strong labor market and rising wage growth. However, a weak German economy and signs of a stagnant recovery could force the ECB to move again in the coming months.

The impact of the French elections on the EUR/USD pair

The French elections have a major impact on the EUR/USD currency pair given France’s importance as one of the largest economies in the Eurozone. The market reacts in particular to the election results and also to statements and forecasts related to the economic and financial policies of the candidates.

EUR/USD forecast: upcoming macro events Among the very serious events is the French parliamentary elections, where the first round will be held on Sunday 30 June and the full extent of the progress made by Marine Le Pen’s party after the July 7 run-off rounds is likely to be known. This political uncertainty is expected to continue. The EUR/USD pair is exposedto pressure or at least limit its bullish potential, thus supporting the dollar index. Current opinion polls point to the lead of Marine Le Pen’s far-right National Front party.

In the US, key data to watch include core PCE inflation figures for May on Friday, the June Nonfarm Payrolls report on July 5, and the CPI report on July 11.

Recently, the US dollar has been favored as a hedge against political uncertainty in Europe, especially as traditional safe-haven currencies such as the Swiss franc and the Japanese yen have become less attractive due to looser monetary policies in Switzerland and Japan. The recent rate cut by the SNB has strengthened the US dollar against the euro, as investors prefer the high-yielding US dollar over the Swiss franc. Thus, the near-term trend and forecast pair remains EUR/USD uncertain amid political instability in France and rise of far-right parties across Europe.

The EUR/USD forecast remains bearish amid political uncertainty in France and economic weakness in Germany. Major macro events and US data releases in the coming days will be crucial in determining the direction of the dollar.

The impact of US economic data on EURUSD and the outlook

This week, the crucial US data is the core PCE index on Friday. Before that, new home sales data will be released today, followed by pending home sales, jobless claims, durable goods orders, and the final estimate of first-quarter GDP on Thursday. Last Friday, stronger-than-expected PMI data and improved home sales supported the dollar. EUR/USD remains Under pressure, the euro is likely to continue to lag behind in any negative scenarios for the US dollar this week, especially ahead of the French elections..

Looking beyond near-term election uncertainty in Europe, the US dollar may start a more significant move if the market gains confidence that the Fed will begin a loosening cycle. This makes the upcoming PCE data particularly critical, followed by the June Nonfarm Payrolls on July 5 and the Consumer Price Index on July 11..

The EUR/USD pair is consolidating between short-term levels without a clear trend. The pair fell below key moving averages such as the 200-day moving average and broke support levels at 1.0790 and 1.0750, which are bearish signals. Support at the top of the range of 1.0650 to 1.0680 was being tested at this writing. Here, we also have an uptrend line that plays a role. Thus, if this support zone is also breached, the next target could be the April low near the 1.06 mark. The technical forecast for the EURUSD pair will only improve with a higher rise or a major reversal pattern on the chart, but no such signals have been observed so far. .

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