EUR/USD Slips Below 1.0700 as US Dollar Gains Ground

7 Jun 2023

EUR/USD slipped below the 1.0700 level during the early European morning, driven down by a strengthening US Dollar and a lackluster risk sentiment. The pair faced additional pressure from mixed German Industrial Production data. Market focus now turns to ECB-related announcements. Yesterday, the price broke the dynamic trendline of the bullish channel, invalidating the potential bullish impulse from the ABCD pattern and causing a renewed decline in bearish momentum. The next target to watch for is around the 1.06450 area and 1.06100.

From a fundamental perspective, the European Central Bank (ECB) is expected to raise interest rates by 25 basis points next week, with the possibility of another hike in July. While the June hike is already priced in, future decisions will depend on data outcomes. Recent economic figures reveal that retail sales in the Eurozone stalled in April, showing consumer caution with a 2.6% decline compared to the previous year. Additionally, Germany reported a weakening in April factory orders, down 0.4% month-on-month. The ECB's monthly survey indicated a decline in inflation expectations to 4.1% in April. On Wednesday, German industrial production data will be released.

On Tuesday, the US Dollar experienced modest gains against other currencies as Wall Street saw a slight increase. Traders remain cautious ahead of a significant week, marked by a gloomy global outlook and expectations of higher interest rates. The Federal Reserve is currently in a media blackout period leading up to the next FOMC meeting. Analysts warn that the upcoming May Consumer Price Index, to be released next Tuesday, will play a crucial role in determining the outcome.