Current trend

The EUR/USD pair fell to 1.0737 after the European Central Bank’s (ECB) decision on monetary policy.

On June 6, the regulator’s officials cut the interest rate by 25 basis points to 4.25%: the agency was the last of the G7 countries to begin a cycle of raising borrowing costs in 2022 and one of the first to return to the “dovish” rhetoric, causing economists to fear that inflation will remain above the target level of 2.00% longer than expected. The EU gross domestic product (GDP) is low, lost 0.4% YoY compared to the previous period. Thus, the ECB is adjusting monetary policy in the context of a poor economy and high inflation, putting significant pressure on the euro. The regulator’s representatives do not comment on further actions, and keeping the interest rate at 4.25% will support the euro.

Meanwhile, after the publication of US data from the labor market, the timing of the US Fed’s monetary easing has shifted: the probability of this in September decreased from 57.0% to 48.3%, and in November, according to the Chicago Mercantile Exchange (CME) FedWatch Instrument, it is 32.9%. Much will depend on today’s data on consumer inflation, which is due at 14:30 (GMT 2). It is expected that the May consumer price index will reach 3.4% and the core value – 3.5%, and if the statistics are lower than forecasts, the regulator’s officials will be able to switch to a “dovish” course in the fall, and otherwise – in December.

Support and resistance

The long-term trend is upward: after reaching the resistance level of 1.0890, the trading instrument began a downward correction, within which it reached the support level of 1.0737, where the asset can reverse upwards and reach the June high of 1.0890.

The medium-term trend is upward, and the price reached the key trend support area of ​​1.0748–1.0731, from where long positions with the target at the high of last week 1.0913 are relevant, and then in zone 2 (1.0953–1.0937).

Resistance levels: 1.0890, 1.0976.

Support levels: 1.0737, 1.0612.

Trading tips

Long positions may be opened from 1.0737, with the target at 1.0890 and stop loss of 1.0686. Implementation period: 9–12 days.

Short positions may be opened below 1.0686, with the target at 1.0610 and stop loss 1.0727.