- The Euro bounces up as market sentiment improves.
- Fears of escalation in the Middle East conflict have eased.
- EUR/USD maintains its bullish trend intact while above 1.1500.
The EUR/USD pair retraced on Monday most of the ground lost on Friday, following Israel’s attack on Iran. The pair has returned to levels above 1.1580 from Friday’s lows at 1.1490 as the market gauges the impact of the Middle East conflict.
Israel and Iran have continued shelling each other over the weekend. Still, so far, the tensions have not spread throughout the region and Iran has not threatened to block the Strait of Hormuz, a strategic path for Oil traffic and whose closure could draw the US into the conflict.
The US Dollar (USD), which rallied on investors’ rush for safety, is losing ground again. Tariff uncertainty and the lack of progress on deals between the US administration and its trading partners are resurfacing, weighing on the Greenback, with the clock ticking closer to the July 9 deadline.
Investors are also looking at the Federal Reserve (Fed), which will decide its monetary policy on Wednesday. Interest rates are unlikely to change, but the soft data seen recently might prompt the central bank to show a dovish shift in the tone of its statement, laying the ground for a rate cut in September.
If that is the case, we could see the US Dollar resuming its longer-term bearish trend in the second half of the week.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.12% | -0.27% | -0.11% | -0.47% | -0.37% | -0.07% | |
| EUR | 0.31% | 0.07% | 0.02% | 0.21% | -0.03% | -0.05% | 0.25% | |
| GBP | 0.12% | -0.07% | -0.02% | 0.14% | -0.10% | -0.12% | 0.18% | |
| JPY | 0.27% | -0.02% | 0.02% | 0.15% | -0.51% | -0.47% | -0.21% | |
| CAD | 0.11% | -0.21% | -0.14% | -0.15% | -0.28% | -0.26% | 0.04% | |
| AUD | 0.47% | 0.03% | 0.10% | 0.51% | 0.28% | -0.02% | 0.28% | |
| NZD | 0.37% | 0.05% | 0.12% | 0.47% | 0.26% | 0.02% | 0.30% | |
| CHF | 0.07% | -0.25% | -0.18% | 0.21% | -0.04% | -0.28% | -0.30% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: The USD loses ground on declining demand for safe assets
- The tensions between Israel and Iran extend for their fourth day, but investors are showing some relief at the fact that the conflict has not spread to other countries. Russia and Cyprus have offered themself to mediate in the conflict, and US President Donald Trump urged the countries to find a deal. Risk aversion is ebbing, and the US Dollar is retreating from Friday’s highs.
- As fears about the Middle East war ease, the focus shifts back to the uncertain global trade scenario. A news report released this weekend suggests that the US-China deal might have left the issue of rare earths commerce unresolved, which increases speculation about the real scope and durability of the agreement. The US administration is failing to cut any significant deal with trading partners, except a modest one with the UK and an ambiguous one with China, and the July 9 deadline approaches. So far, this anxiety is harming the US Dollar the most.
- The economic calendar is light in the Eurozone and the US on Monday. The main focus this week will be the Fed’s monetary policy decision, due on Wednesday. The main interest will be on Chairman Jerome Powell’s press release to assess whether the weak macroeconomic data seen in recent weeks has prompted the central bank to consider a rate cut in the near term.
- Futures markets are pricing steady interest rates in June and July, and a 66% chance of an interest rate cut in September, according to data released by the CME Group’s Fed Watch tool.
- In Europe, earlier on Monday, the Bundesbank President and ECB’s council member, Joachim Nagel, remained in a rather neutral territory. He reiterated that the bank should not rush to cut rates further but that the monetary policy committee should remain flexible amid an exceptionally uncertain period.
- Friday’s data revealed that the Eurozone Industrial Production month-over-month contracted at a 2.4% pace in April, well beyond the 1.7% fall expected, in a sign that tariff uncertainty has started to bite into the region’s economy. These figures increased negative pressure on the Euro (EUR).
- In the US, the University of Michigan Consumer Sentiment survey showed improvement, with the index reaching its best preliminary reading in the last four months, at 60.5. Preliminary 1-year Consumer Inflation Expectations, on the other hand, declined to 5.1% in June from 6.6% in May.
Technical analysis: EUR/USD maintains its bullish trend intact while above 1.1495
EUR/USD was rejected at levels above 1.1600 and corrected lower on Friday. Downside attempts, however, have been contained above a previous resistance area, at the 1.1500 area, which keeps the broader bullish structure intact.
The pair is now trading at intra-day highs, with the 4-hour chart RSI moving well above the 50 level, indicating positive momentum. The next resistance is at Friday’s highs in the 1.1615-1.1630 area. Above here, the next target might be the 361.8% Fibonacci extension of May’s range, at 1.1680
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
On the downside, the support area is at the June 5 high, at 1.1495, and the 1.1500 psychological level is keeping bulls in control. Below here, the next support is at the 1.1460 area, where the pair was capped on June 2 and 10. Further decline beyond this level would put the bullish trend into question.
