The euro-dollar pair continues to trade within the range of 1.0850–1.0930 at the start of the new trading week (the middle line of the Bollinger Bands indicator, which coincides with the upper boundary of the Kumo cloud on the D1 timeframe, and the Tenkan-sen line on the same timeframe).
On Friday, traders tested the upper boundary of the range, reacting to the report on the growth of the core PCE index. The core inflation indicator, which is crucial for the Federal Reserve, ended up in the "red zone": according to the forecasts of most experts, the May index was expected to remain at the April level, i.e., at 4.7%. However, in reality, it fell to 4.6%. Although it cannot be said that inflation is slowing down in this case (the indicator is still at a relatively high level), the "red tint" of the release contributed to the strengthening of bullish positions in EUR/USD, but still within the aforementioned price range. The pair's buyers were unable to establish themselves above the 1.0930 level and today have returned to the 1.08 range. Traders are awaiting key macroeconomic releases of the week, which will either strengthen or weaken hawkish expectations regarding the Federal Reserve's future actions after the July hike (the fact of which is no longer in doubt).
Monday
The main report of the day for the EUR/USD pair is the ISM Manufacturing Index, which will be published in the U.S. during the American trading session. This is a significant release that can once again spoil the mood of the dollar bulls. A month ago, this indicator unexpectedly entered the "red zone," causing a decline in the greenback across the market. And judging by the situation, a similar scenario may repeat today. The ISM Manufacturing Index has been below the key 50-point level (the boundary between improvement and deterioration in the manufacturing sector) since November of last year. In May, it decreased to 46.9, despite the forecast growth to 48 points. According to preliminary forecasts, the index will reach 47.2 points in June. It is worth noting that even the projected result will not be in favor of the dollar. If the indicator again falls into the "red zone," buyers of EUR/USD will have a reason to counterattack.
Tuesday – Wednesday
On Tuesday, July 4, the economic calendar for the EUR/USD pair is practically empty as the United States celebrates Independence Day. The only relatively significant release on Tuesday is the data on Germany's foreign trade (trade balance). However, this release will not have any significant impact on the pair.
And on Wednesday, the minutes of the June Federal Reserve meeting will be published. This document is capable of causing increased volatility among dollar pairs, and EUR/USD will not be an exception. On the one hand, Federal Reserve Chairman Jerome Powell has repeatedly voiced his position over the past two weeks: directly after the June meeting, twice before Congress, and at the ECB forum in Sintra, Portugal. From one speech to another, he gradually tightened his rhetoric. If, at the final press conference, Powell argued about the advisability of further rate hikes, then last week he said that "the majority of the members of the American regulator support two or more increases this year."
Recall that following the June meeting, the Federal Reserve announced a pause but indicated that the current tightening cycle is not yet complete. The minutes of this meeting will shed light on the prevailing sentiments within the Federal Reserve. If the document has a "hawkish" tone, the dollar will receive support across the market.
Thursday – Friday
On Thursday, July 6, the main macroeconomic reports will also be published during the American trading session. First, the ADP report will be released, which serves as a kind of harbinger ahead of the Nonfarm Payrolls report, which will be released the next day. According to forecasts, the private sector employment increased by 236,000 in June. On the one hand, this is a good result. On the other hand, a downward trend will be observed in this case (a decrease in the indicator for the second consecutive month).
Additionally, on Thursday, we will learn the value of the ISM Non-Manufacturing Purchasing Managers' Index (PMI). Unlike the manufacturing index, an increase in the indicator is expected here, up to 51.3 points. Since January of this year, it has been above the key 50-point level. A negative reaction to the release is expected only if the index unexpectedly drops below the 50.0 mark. However, this scenario appears highly unlikely.
Lastly, on Friday, July 7, the key macroeconomic report of the week for the EUR/USD pair—the Nonfarm Payrolls, will be published.
According to preliminary forecasts, the unemployment rate in the U.S. is expected to drop to 3.6% in June after an unexpected rise to 3.7% in May. The non-farm employment is projected to grow by 222,000. Again, similar to the ADP report, on the one hand, this is a relatively good result, but on the other hand, the indicator will demonstrate a downward trend after two months of growth.
Special attention should be paid to the inflationary indicator. Average hourly earnings in June are forecasted to hit 4.2% YoY, reflecting a slowdown from 4.3% in May. And although the slowdown will be minimal, the result of "4.2%" will be the lowest since September 2021. If this component of the report ends up in the red, the dollar will come under pressure, even if all other indicators are in line with expectations.
From a technical point of view, the EUR/USD pair is currently in an uncertain situation. The price on the daily chart is located between the middle and upper lines of the Bollinger Bands indicator, but at the same time, it is also between the Kijun-sen and Tenkan-sen lines. Considering long positions is advisable only after buyers surpass the upper boundary of the price range 1.0850–1.0930. In that case, the Ichimoku indicator will form a bullish "Parade of Lines" signal on the D1 timeframe, opening the way to the next resistance level at 1.1040 (the upper line of the Bollinger Bands on the same timeframe).
On the other hand, selling opportunities will be relevant once sellers break below the lower boundary of the Kumo cloud (1.0820)—in this case, the "Parade of Lines" will have a bearish character. I assume that in the coming days (before the publication of the Fed minutes), the pair will continue to trade within the range of 1.0850–1.0930.
