Current trend

The EUR/USD pair has been steadily declining during the current month and is currently testing the 1.0681 mark (Murrey level [3/8]). The single currency is pressured amid the start of a monetary policy easing cycle by the European Central Bank (ECB), while regulator officials are actively hinting at the possibility of further reduction in borrowing costs. Yesterday, the head of the Bank of Finland, Olli Rehn, announced the expectation of one or two more interest rate cuts before the end of the year.

At the same time, the further actions of the US Federal Reserve look much more uncertain: despite the decline in the consumer price index from 3.4% to 3.3% in May, American officials still allow for a long-term continuation of the current tight monetary policy and even the possibility of a new increase in the cost of borrowing if necessary. Nevertheless, new economic data can influence the decisions of the regulator. Today, statistics on gross domestic product (GDP) for the first quarter, and on Friday – the May price index of personal consumption expenditures will be published. According to forecasts, economic growth will slow from 3.4% to 1.3%, while the expenditures index will decrease from 0.2% to 0.1% MoM and from 2.8% to 2.6% YoY. The implementation of the forecasts will confirm the creation of the basic conditions for the correction of monetary policy, which may put significant pressure on the US currency. Otherwise, the EUR/USD pair will continue to decline.

Support and resistance

Technically, the asset is trading within a long-term descending channel and is currently testing the 1.0681 mark (Murrey level [3/8]), below which it has not been able to break through for several weeks in a row. If successful, the decline in quotations will be able to continue to 1.0559 (Murrey level [1/8]) and 1.0498 (Murrey level [0/8]). The key for the "bulls" is the resistance zone 1.0770–1.0742 (the central line of Bollinger Bands, Murrey level [5/8]), the breakdown of which will allow the trading instrument to resume growth towards the targets of 1.0864 (Murrey level [6/8]) and 1.0945 (50.0% Fibonacci retracement), but so far this scenario seems less likely.

Technical indicators confirm a further decline: Bollinger Bands and Stochastic are reversing down, and MACD is increasing in the negative zone.

Resistance levels: 1.0770, 1.0864, 1.0945.

Support levels: 1.0681, 1.0559, 1.0498.

Trading tips

Short positions should be opened below 1.0681 with targets of 1.0559, 1.0498 and stop-loss around 1.0725. Implementation period: 5–7 days.

Long positions can be opened above the 1.0770 mark with targets of 1.0864, 1.0945 and stop-loss around 1.0705.