Bears of the EUR/USD currency pair are taking a break. Even though traders might be flirting with 1.0250 while going into the European session.
It should be noted that the quote had the sharpest drop since March 2020. This happened on Tuesday after it broke a support line spanning two weeks. The EUR/US pair is domiciled in a rectangle formed between 1.0275 and 1.0230.
EUR/USD price chart. Source TradingView
There is an oversold relative strength index in anticipation of Wednesday’s FOMC minutes. The market is also expecting the ISM services PM index for the month of June. It is expected to come in at 54.5 against the last figure of 55.9.
There is palpable anxiety in the market as a result and it limits EUR/USD moves. Therefore, there is a corrective pullback in sight. Even if the 20-period hourly moving average is around 1.0265 limits the pair’s increase.
It should also be noted that the pair’s increase beyond 1.0275 requires validation. This has to come from the last support line in June and the 100-period HMA. They are respectively close to 1.0330 and 1.0400.
While at that, breaking the downside of the 1.0230 might make way for 1.0200. It was the high of July 2002.
After that, the 1.0100 mark might be the intermediate pause while the slide is on. It would target the 1.0000 psychological pull.
The Currencies Struggle
Bulls of the Euro saw a sharp fall after it violated the significant 1.0365 support. Increasing fears of recession aided the US Dollar while riskier currencies went down swiftly.
Retail sales in the Eurozone will still be in focus going forward. The current estimate for the economic report stands at 5.4% annually against 3.9% prior. The quarterly report has also increased at 0.4% vs. the prior figure of -13%.
The FOMC minutes will be critically watched for any clues. As expected, the minutes will outline the reasons behind the interest rate increase. The decisions were taken before the monetary policy meetings.
Just that now, the minutes carry more importance. The Fed increased interest rates by 75 bps for the first time in 28 years. It pronounces the most hawkish move and shows that inflation fears are real.
The increase equally gives a meaningful direction for the meeting coming up this month. Aside from that, reports from the service PMI will be significant. The market thinks the economic data will drop to 54.5 from 55.9.