As I mentioned since the start of this important week’s trading, the US dollar will remain the strongest until the reaction to the most important event this week passes, which is the monetary policy decisions of the Federal Reserve. EUR/USD Losses extended towards the support level 1.0396, which is close to breaching its lowest level during 2022. It is settling around 1.0420 at the time of writing the analysis.

The Euro did not benefit much from the announcement that the ZEW economic sentiment reading rose to a four-month high of -28.0 in June from -34.3 in May. The reading was expected to rise to -27.5. The current situation index improved in May by 8.9 points to minus 27.6 points. The expected result was -31.0. Commenting on the results, ZEW President Achim Wambach said financial market experts are less pessimistic about the economy. Wambach added that the economy is still exposed to many risks, such as the effects of sanctions against Russia, the unclear epidemiological situation in China, and the gradual change in the course of monetary policy.

According to the reporter, economic confidence in the euro zone improved in June. The economic confidence index rose 1.5 points to -28.0. The status index rose by 8.6 points to a new level of minus 26.4 points. Moreover, the survey showed that inflation expectations in the euro zone fell again in June. The index came in at -32.4 points, which is 21.8 points lower than it was in May.

Earlier, the Statistics Office confirmed the rise in German inflation for the month of May. Consumer price inflation in Germany accelerated to 7.9 percent from 7.4 percent in April, driven by higher energy prices. Similar high inflation was last reported in the winter of 1973/74.

On the future of monetary policy: The European Central Bank is expected to raise interest rates in quarter-point increments after more than twice that planned volume in September, according to economists polled by Bloomberg. The European Central Bank pledged to raise borrowing costs for the first time in more than a decade in July, and respondents said it would raise them further at each of this year’s three remaining meetings.

After the larger step that policymakers began in September, they will return to smaller steps, including two in the first half of 2023 in February and June the survey showed. Faced with unprecedented inflation in the Eurozone of more than four times the 2% target, the European Central Bank is under pressure to raise the deposit rate from -0.5%. Once the increases kick in, investors see a more aggressive trajectory than economists – betting on 171 basis points to tighten by the end of the year.

According to the technical analysis of the pair: There is no change in my technical view towards the future price of the EUR/USD currency pair, as the general trend is still bearish. The bears are ready to move in prices towards lower support levels, and the closest to them are currently 1.0380 and 1.0290, respectively. Investors will not care much about the arrival of technical indicators towards strong oversold levels, especially if the US Central Bank’s decision today is in favor of further tightening its policy strongly throughout 2022.

On the upside, if the euro dollar gains some momentum to rebound, its first stop will be the resistance levels 1.0520 and 1.0665, respectively. The euro dollar gains will remain subject to sale as long as the divergence is strong between the European Central Bank and the Federal Reserve in the path of raising interest rates. Investors will not care as much about the results of China’s data, the eurozone, and even the US economic data, as much as they will be interested in the Federal Reserve’s announcement.

The EUR/USD exchange rate entered the new week’s trading near its lowest levels in several years, stable around the 1.0880 support level closest to the most important bear target 1.0800. The French political developments and the European Central Bank (ECB) policy could provide partial compensation during the next few days. The outlook for Fed policy is likely to become increasingly onerous. Overall, the euro has been one of the biggest declines for currencies since early last week when market concern about the sanction’s response to allegations of Russian atrocities in Ukraine weighed significantly on continental currencies.

This comes after opinion polls were released after the vote in the first round of the French presidential election that appears to give a clear lead for the incumbent position ahead of the second round of April 24. It is in anticipation of a possible supportive political decision on Thursday from the European Central Bank.

Uncertainty over the outcome of the French election on April 24 was widely cited as a risk to the EUR last week to the extent that it dragged the currency’s performance down. There may be some respite over the coming days. Relief may be more likely regarding the likes of the Swiss franc as a safe haven compared to the US dollar, however, given that this Tuesday will release US inflation data for March, the US Federal Reserve is increasingly poised to respond to mounting price pressures. by raising interest rates.

Commenting on the outlook for the EUR/USD, Joseph Caporso, Head of International Economics at the Commonwealth Bank of Australia said, “We expect the EUR/USD to consolidate following last week’s weakness. The mid-March low of 1.0806 is likely to be tested in the coming weeks. The low point pandemic at 1.0688 is within reach as well.” “The European Central Bank is in a difficult position because higher energy prices reduce disposable income and economic growth,” the analyst added. This is in contrast to the FOMC, where the task of tackling extremely high inflation is the main focus on the backdrop of a strong economy and a tight labor market.”

Like many other exchange rates facing the US, the EUR/USD rate has come under increasing pressure in recent weeks as the Federal Reserve has made it increasingly clear that US policy makers can move faster than even financial markets are willing to extend credit. This scenario may become more likely on Tuesday if US inflation pressures turn out to have increased last month, which is likely to limit any recovery in the EUR/USD pair ahead of Thursday’s European Central Bank monetary policy decision.

According to the technical analysis of the pair: There is no change in my technical view for the future price of the EUR/USD currency pair. The general trend is still bearish, and the ideal bear target is 1.0800, which is the closest currently. This may expose the EUR/USD to more bearish momentum, and therefore moving towards deeper support levels may be the target. On the other hand, the Eurodollar gains are still a target for sale as the Euro is still directly and continuously exposed to the Russian/Ukrainian war. According to the performance on the daily chart, the break of the resistance 1.12 will give an opportunity to break the current descending channel.

The euro is awaiting the announcement of the German ZEW reading, and the US dollar is awaiting the announcement of the US inflation numbers.