EUR/USD Dips Below 1.0700 as Fed Rhetoric Outweighs Weak US Data
The EUR/USD pair weakened on Tuesday, falling below the key 1.0700 level during the American session. This decline came despite softer-than-expected US economic data, as hawkish remarks from Federal Reserve (Fed) officials and concerns about the Eurozone's economic outlook weighed on the Euro.
Market Drivers: Fed's Hawkish Stance and Eurozone Woes
- Fed's Hawkish Rhetoric: Despite a decline in US manufacturing activity and slower inflation, Fed officials maintain their commitment to higher interest rates until inflation consistently trends towards their 2% target. This hawkish stance has bolstered the US Dollar, putting pressure on the EUR/USD pair.
- Eurozone Inflation and Growth Concerns: Preliminary Eurozone HICP data for June showed a slight slowdown in inflation, but core inflation remained stubbornly high, fueled by sticky service sector prices. Additionally, the weakening German economic outlook, highlighted by the recent IFO data, is raising concerns about the region's growth trajectory.
- Political Uncertainty in France: The upcoming French parliamentary elections and the possibility of a far-right government continue to add to the Euro's woes.
Technical Analysis: EUR/USD Struggles Below Key Moving Averages
The EUR/USD pair is struggling to regain ground after failing to hold above the 20-day Exponential Moving Average (EMA). The pair remains trapped within a symmetrical triangle pattern, with the 200-day EMA acting as a strong resistance level.
The 14-period Relative Strength Index (RSI) remains in the neutral range, indicating indecision among market participants. However, a break below 40.00 could trigger further bearish momentum.
Key Takeaways:
- The EUR/USD pair is facing downward pressure due to the Fed's hawkish stance and concerns about the Eurozone's economic outlook.
- Political uncertainty in France and the upcoming preliminary Eurozone HICP data will be key factors to watch in the near term.
- The technical outlook remains bearish, with the pair struggling to break above key resistance levels.