The euro/dollar pair did not stay within the 6th figure today. The price crossed the resistance level of 1.0600, but then the northern momentum began to fade, as buyers began to take profits. This is not the first attempt to storm the sixth price level. The first such attempts were made last week when traders reached 1.0607. EUR/USD buyers made another breakthrough yesterday, reaching the target of 1.0615. All these attempts have failed.
It is noteworthy that all previous attempts were mainly due to the weakening of the US currency. Whereas today's northern breakthrough happened due to the strengthening of the euro. The single currency reacted to the hawkish rhetoric of Christine Lagarde, who today opened the ECB economic forum in the Portuguese city of Sintra. It should be recalled here that Lagarde's previous speech (in the European Parliament) last week put pressure on the euro. The head of the ECB hinted that the September increase is still an unresolved issue – they say the regulator may raise its interest rates again in September "if the situation requires it." At the same time, she assured MEPs that in July the rate will be increased by only 0.25%.Lagarde's indecision disappointed EUR/USD buyers, after which the price briefly fell into the area of the 4th figure. But today, the head of the ECB can be said to have "rehabilitated" – at least, her rhetoric was more confident and hawkish.
In particular, she said that the European regulator is ready for a more drastic tightening of policy to curb inflation "if necessary." In other words, Lagarde made it clear that by September the ECB may be ready for a larger rate hike if inflation in the eurozone continues to show growth. In this context, special attention should be paid to Friday's release: on the last trading day of this week, a report on the growth of the consumer price index in Europe will be published. According to preliminary forecasts, the overall CPI in the eurozone will again update the historical record, reaching 8.4%. The core index should also demonstrate positive dynamics, rising to 4%. If this release is released at the forecast level (not to mention the "green zone"), the market will again talk about the increased probability of a 50-point rate hike following the results of the September meeting.
It should also be noted that at today's forum in Sintra, Lagarde spoke about ways to solve the problem of fragmentation in the European region. According to the head of the ECB, the regulator will use "flexibility" when reinvesting repayments coming under PEPP. Lagarde stressed that such a flexible approach "will limit undesirable fluctuations in the government bond market after an interest rate increase."
In other words, the head of the European Central Bank voiced very encouraging and rather hawkish theses, thanks to which EUR/USD traders once again tested the 6th figure - this time due to the strengthening of the euro.
And yet, buyers could not hold their positions above the 1,0600 mark. The pair turned 180 degrees and headed to the base of the 5th figure, against the background of the growth of the US dollar index. It is noteworthy that traders ignored even a weak report from the United States: the June CB consumer confidence index fell to 98.7 points, while experts expected it to be at around 100. The indicator has been declining for the second month in a row. However, stronger reports on durable goods and home sales in the States partially offset the decline in the American consumer confidence index.
In general, Tuesday's intraday price dynamics suggest that traders prefer not to take risks with longs, being above the target of 1,0600. As mentioned above, buyers repeatedly tested the boundaries of the 6th figure, but each time they came back. The dollar was also supported today by the head of the Federal Reserve Bank of New York, John Williams, who stated that "recession is not its base scenario." He also noted that the Federal Reserve "needs to reach 3.5% - 4% of the federal funds rate." At the same time, he confirmed the likelihood that the Fed will also raise the rate by 75 basis points in July.
In my opinion, the EUR/USD pair in the medium term will continue to trade within the wide-range flat, in the range of 1.0450-1.0600. Traders have not left this price corridor for the second week. For the development of the southern trend, sellers should at least go to the base of the 4th figure, and at most - gain a foothold within the third figure. Buyers, in turn, should be designated above 1.0600 to qualify for more ambitious goals, among which is a return to the price range of 1.0640–1.0760.
Neither sellers nor buyers of the pair have yet decided to leave the 1.0450-1.0600. Therefore, when approaching the resistance level of 1.0610 (the lower limit of the Kumo cloud on the daily chart), it is advisable to open short positions with targets of 1.0500 and 1.0450 (the Tenkan-sen line on the same timeframe).
