Fundamental analysis of EUR/USD

The currency pair EUR/USD started the week sluggishly, as there was no important economic data from the Eurozone, which could indicate the direction. The movement of the currency pair was mostly influenced by central bank news and geopolitical events. The euro experienced a decline, falling to a low of 1.0900, mainly due to a stronger U.S. dollar and hawkish statements from the European Central Bank (ECB) and the Federal Reserve (Fed).

In geopolitics, the visit of U.S. Secretary of State Anthony Blinken to China attracted attention. The visit included a meeting with Chinese Foreign Minister Qin Gang and was aimed at establishing a more predictable and stable relationship between the U.S. and China. However, current issues related to Russia and Taiwan could slow the pace of progress in U.S.-China relations. Such geopolitical factors play a crucial role in influencing currency trends.

In addition, market participants are eagerly awaiting statements from key ECB figures. Philip Lane along with board members Isabel Schnabel and Luis de Guindos are expected to make remarks on the ECB's recent hawkish stance. Investors are looking for information on inflation, the economic outlook and monetary policy, as these factors can significantly affect market movements.

As far as banking news is concerned, there is a strong possibility that the ECB will continue to raise rates by another quarter point in July. This position is supported by Christine Lagarde of the ECB and Federal Reserve Chairman Jerome Powell. CME Group's FedWatch tool suggests that there is about a 75% chance of a rate hike.

As a result of the uncertain environment, investors have been cautious, which has led to a reduction in speculative net long positions in the euro for five consecutive weeks. This is in line with market expectations ahead of the important ECB meeting on June 15.

In addition, there is a clear divergence in the strategies used by global central banks, ranging from suspending hawkish positions to raising rates or shifting to a dovish tone. The ECB's recent decision to raise rates, combined with rising inflation, suggests that more rate hikes are likely in the eurozone. Conversely, even though the Fed has temporarily suspended its rate hike cycle, it is still projected to hold two additional rate hikes during the year. This is also supported by the fact that German two-year bond yields hit a new three-month high, indicating that the market expects the ECB to maintain its short-term approach.

In conclusion, both central bank decisions and geopolitical factors are currently affecting the EUR/USD currency pair. Markets are watching closely for any information regarding inflation and monetary policy, as these are key elements that could affect currency trends.

Technical analysis and scenarios:

Taking both technical and fundamental analysis into account, the EUR/USD pair appears to be in an uptrend, as evidenced by the Alligator indicator. However, Awesome Oscillator (AO) and Accelerator Oscillator (AC) suggest a potential upcoming bearish trend as both are in the red zone and approaching the zero level, indicating a strong sell signal.

Recommended entry level (BUY): 1.09800.

Take Profit: 1.10300 and 1.10840.

Stop loss: 1.08820.

Recommended entry level (SELL): 1.08800.

Take Profit: 1.08300 or 1.07800.

Stop loss: 1.09700.