The Euro dollar experienced a turbulent week, initially rising due to encouraging US CPI data. However, upward revisions to both the Fed funds rate and inflation outlook propelled the US dollar higher heading into the weekend.

This volatility is driven by two main forces: a stronger US dollar following recent Fed forecast revisions and a vulnerable euro amid political uncertainty in France. This has resulted in a flight to safety within the European bond market, led by German Bunds, which has inflated the risk premium across Europe and historically led to a weaker euro.

This week, we are watching the 1.0700 level for a potential pause in the recent sell-off. Neither the euro nor the dollar has significant data releases scheduled for the week, potentially providing a reprieve for the EUR/USD. However, the RSI has not yet reached oversold conditions, which bears will note. The pair's movement will likely be influenced by political developments and the bond market this week.

EUR/USD REFLECTS THE INFLUENCE OF A STRONGER USD AND A WEAKER EURO

Jun 17 2024

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