EURUSD attempts to hold 1.0700

19 Haz

EURUSD ANALYSIS
- Focus returns to Europe and France in particular in the lead up to the elections
- Will the ECB step in to calm widening bond spreads considering Frances debt load?
- EUR/USD fails to capitalize on Mondays reprieve – downside risks remain

WILL THE ECB STEP IN TO CALM WIDENING BOND SPREADS CONSIDERING FRANCE'S DEBT LOAD?
With the focus shifting back to Europe, particularly France, the campaign for the upcoming parliamentary elections is in full swing. The rising popularity of Marine Le Pen's National Rally party has concerned markets, as they see it as a potential unpredictable force impacting European bond markets. The risk premium applied to riskier nations like Italy and France is reflected in the French-German spreads, while investors have turned to safer German bonds. Keep an eye on any sell-off in periphery nations' bonds as it could lead to a weaker euro when France goes to vote.

The ECB's Chief Economist, Philip Lane, described the recent bond market movement as "repricing" and not chaotic. The ECB introduced a new tool to address any potential fragmentation in the bond market in 2022, which involves purchasing bonds from qualifying member states if borrowing costs become uncontrollable. France's debt to GDP ratio is currently above the EU's recommended 60%, which may complicate their eligibility for assistance if spreads get out of control.

EURUSD ATTEMPTS TO HOLD 1.0700 BUT DOWNSIDE RISKS REMAIN
On Monday, the pair attempted to break through the 1.0700 level, but concerns about momentum and downside risks persist. The price is currently trading below the 200 simple moving average and is likely to retest 1.0700. Key support levels are at 1.0600 and potentially even 1.0450, which was the low point of the major decline in 2023.

EU inflation data has been declining despite a slight increase in May. The ECB is considering another interest rate cut. Today, ZEW economic sentiment fell short of expectations at 47.5 (slightly better than last month's 47.1). Inflation expectations have increased due to the slightly higher May figures.

22 Tem

Not

EUR/USD needs to hold above 1.0800 to maintain the uptrend, if it falls below this level first support will appear around 1.0740, on the way towards 1.0660. A deeper decline would push the pair towards the year's low at 1.0600 if the USD regains its footing.

25 Eyl

Not

EURUSD is extending its upward momentum above 1.12000 during the session, approaching its peak since July 2023 - 1.1271. This is also the next goal. The support level is located around 1.1184.

1 Eki

Not

There is only one deal to note today. That is the EUR/USD options contract at 1.1100. The price action since last week shows that while reaching 1.1100 may take time, if it happens, there will be many factors that will help stabilize the rate at this level. If the USD does not fluctuate much, then expiring contracts will not have a significant influence on market movements in the next trading session.