EUR/USD: Investors Anticipate Powell’s Testimony as Euro Holds Steady

Highlights

• Euro remains steady as investors await Powell’s testimony.
• Speculation of further rate hikes despite recent Fed pause.
• Euro zone bond yields reflect concerns over inflation and tightening measures.

Overview

The Euro traded mostly unchanged against the US Dollar as investors eagerly anticipated Federal Reserve Chairman Jerome Powell’s testimony. Powell, alongside other Fed officials, prepared to address the House Financial Services Committee, as market participants sought greater clarity on monetary policy and the economic outlook.

Traders Expect July Fed Rate Hike

While the Fed recently paused its rate-hiking campaign, policymakers indicated that more rate hikes are likely this year. Euro zone government bond yields rose slightly ahead of Powell’s testimony, reflecting concerns about inflation and the need for further tightening measures. Market observers speculated that the June pause in rate hikes could have been a compromise within the Fed, with the promise of a hike in July.

Euro Area Yields Edge Up

Germany’s 10-year government bond yield, the benchmark for the euro area, edged up, while short-dated yields climbed to pre-crisis levels. Analysts noted comments from the Bank of France Governor, who suggested that the ECB had likely completed most of its interest rate increases. This statement highlighted the importance of the duration of tight monetary policy in combating inflation rather than further rate hikes.

Possible September Rate Hike by ECB

Lithuanian policymaker Gediminas Simkus hinted at a potential rate hike in September. Italian bonds experienced upward pressure, with rising 10-year bond yields and a widening spread between Italian and German yields.

Short-Term Outlook:  Focus on Powell

In summary, the Euro held steady, awaiting Powell’s testimony, while bond yields and market expectations hinted at potential future tightening measures. The market remained attentive to the Fed’s stance on monetary policy and the economic outlook, particularly regarding inflation and rate hike expectations.

Technical Analysis

In the EUR/USD, the current 4-hour price of 1.0919 indicates a minor downward movement compared to the previous close. The market is trading above both the 200-4H and 50-4H moving averages, suggesting a potentially bullish sentiment. The 14-4H RSI reading of 56.80 reflects moderate strength in the market. Additionally, the market faces significant resistance within the main resistance area of 1.0971 to 1.1006. Taking these factors into account, the overall market sentiment for EUR/USD can be considered cautiously bullish, with the price encountering resistance levels as it seeks further upward movement.