- Elections in France put the far-right National Assembly party in first place.
- ECB policymakers remain confident that inflation will reach the target.
- The core US PCE price index was down from the previous month.
The EUR/USD forecast is bullish as the euro rises after one round of French elections. Meanwhile, the dollar was on the back foot after the previous session’s inflation data raised bets for a Fed tapering in September.
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On Sunday, French elections put the far-right National Assembly party in first place. However, the win was less than expected, supporting the euro. If the far right performs poorly, there will be less fear of a financial crisis. The euro has fallen in recent sessions since Macron announced snap elections that have created a cloud of political uncertainty. However, after the election, the EUR/USD pair hit a two-week high before retreating.
Elsewhere, ECB policymakers remain confident that inflation will reach the central bank’s target. Accordingly, the central bank is likely to continue to cut interest rates. Meanwhile, the Fed has yet to begin its tapering cycle.
The dollar was weak after data on Friday showed weaker inflation in May. The core US PCE price index met expectations at 2.6%, down from the previous month. That gave investors more confidence that the Fed will cut in September. However, policymakers may continue to monitor incoming data for more evidence that the decline to 2% will continue.
Currently, markets estimate a 63% chance that the Fed will start cutting borrowing costs in September. That could change this week after the US non-farm payrolls report, due on Friday.
EUR/USD key events today
- German Prelim CPI m/m
- US ISM Manufacturing PMI
EUR/USD Technical Forecast: Bulls break range above 1.0750
On the technical side, the EUR/USD price rose and broke above the resistance level at 1.0750. Furthermore, the price broke out of its consolidation area between support at 1.0675 and resistance at 1.0750.
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The previous bearish move showed weakness when the price broke the 30-SMA resistance. At the same time, the RSI made a bullish divergence, indicating a weakening of the bearish momentum.
After that, the price entered an area of consolidation, where bulls and bears fought for control. The bulls won when the price rose, showing huge bullish momentum, before breaking above 1.0750. Bulls could now target the resistance level of 1.0850.
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