The single currency in the EUR/USD pair continues to be under pressure from the US currency, which is in demand among traders. However, the initial euphoria of dollar bulls, observed after the summit of the G20, is gradually fading away. Paired with the euro, the dollar managed to break through the support level of 1.1305 (the middle line of the Bollinger Bands indicator, which coincides with the Tenkan-sen line on D1), but could not overcome the next support level of 1.1280 (the upper Kumo cloud boundary on the same timeframe).
The dollar index also ceased to gain momentum, barely going into the region of the 96th figure. But the yield of 10-year-old treasurers began to decline at a fairly active pace - the figure keeps at around 2.007% and at any moment can "dive" at a 2 percent level. In general, the situation with the dollar unfolds according to a fairly predictable scenario: the market "celebrated" the trade war's temporary truce, but then asked a logical question - is a full-fledged peace possible between the US and China, given the volume of demands placed on each other? And how does the Fed interpret the G20 results, given the fact that all the additional duties introduced earlier continue to have a negative impact on the US economy?
These issues are unable to resume the upward trend of EUR/USD, but at the same time they are able to sow the corresponding doubts among traders, thus extinguishing the downward price impulse. And here it is worth recalling that the US trading platforms will work tomorrow in a reduced mode (on the eve of US Independence Day), and they will be completely closed on Thursday, as the country will celebrate Independence Day. Therefore, in the full-fledged mode, the foreign exchange market will resume its work only on Friday, when key data on the growth of the US labor market will be published.
It is to this release that the main attention of traders will be shifted, since the Nonfarms will largely determine the fate of the Fed interest rate. In the meantime, dollar bulls will trade by the inertia of the latest events in Osaka and in anticipation of the comments of representatives of the US regulator after the G20 summit. Of course, price "delays" in the direction of lowering EUR/USD are possible until Friday, but if we talk about the continuation of the downward trend (or the resumption of corrective growth), Nonfarms will play a key role here - until they are published, market makers are unlikely to decide on any or large scale actions. Especially after the disappointing May data.
An interesting situation with the single currency. Let me remind you that the latest release of data on the growth of European inflation actually passed by traders - the market was completely absorbed by the expectations of the G20. Nevertheless, the published figures deserve attention, even if in hindsight. And although the general level of inflation in the eurozone remained at the level of May (1.2%), core inflation was surprised by a rather rapid growth of up to 1.1% (with a growth forecast of up to 1% and a previous decrease of 0.8%). The day before this release, the German consumer price index was published, which for the first time in two months moved away from the lows of the year and rose to 0.3% (forecast - 0.2%). On an annualized basis, a positive trend was also recorded: the index reached 1.6%, while the growth forecast was up to 1.4%. The regional reports of the German CPI reflected a general improvement in inflation rates in annual terms.
But political events muffled this release: traders initially reacted to rumors about the prospects for US-China relations, and after the G20 followed the general trends, they "reflexively" bought the dollar. Nevertheless, today, the euro emerged with the help of the American news agency Bloomberg, which published insider information on possible actions by the ECB. Referring to anonymous sources in the camp of the Board of Governors, the journalists stated that it is very likely that the European Central Bank will maintain the status quo at its next meeting. According to unnamed sources, members of the regulator will take the appropriate decision in the fall, when key macroeconomic indicators will form a more detailed and comprehensive picture of economic growth in the eurozone. At the same time in July, the ECB may prepare the ground for a possible mitigation of monetary policy parameters in the future. The regulator may change the text of the accompanying statement accordingly, and Mario Draghi soften the tone of his rhetoric.
At first, the European currency reacted positively to the news, "shooting" to the level of 1.1320. However, the EUR/USD bulls could not keep this peak, as the likelihood of the introduction of additional monetary incentives from the ECB still remains. In addition, in the afternoon, the chief economist of the European Central Bank Philip Lane aggravated the situation for the euro, saying that, despite certain changes, inflation has not yet reached its target levels, forcing the central bank to maintain accommodative policies. True, he noted that negative interest rates are a temporary phenomenon (and a forced measure), but traders ignored this remark, focusing on expectations of easing monetary policy.
Thus, the situation for the euro-dollar pair remains uncertain. The downward impulse died away, but at the same time dollar bulls are able to keep the situation under control - an attempt at corrective growth of EUR/USD has not been crowned today. On the other hand, for the development of the downward movement, the bears of the pair need a strong informational occasion, which is not currently available. As a result, the pair got stuck in the flat, entrenched in the 12th figure. If sellers still push the mark of 1.1280 (and consolidate below it), then the next support level will be the 1.1170 mark (the bottom line of the Bollinger Bands indicator on the daily chart, which coincides with the lower boundary of the Kumo cloud). But ahead of the Nonfarms release, this target is unlikely to be in the teeth for EUR/USD bears.
