- There were political tensions after French President Emmanuel Macron called for early elections.
- The euro suffered while the dollar strengthened after Friday’s non-farm payrolls report.
- Markets have reduced expectations for a Fed rate cut in 2024 from 50 to 35 basis points.
The EUR/USD outlook remains bearish as the euro hovers near one-month lows weighed down by political uncertainty. Adding to the euro’s woes, the currency weakened further against the strong dollar, which rose after an upbeat jobs report.
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There were political tensions after French President Emmanuel Macron called for early elections. This happened after the European parliamentary elections, in which right-wing parties took the majority of seats. This left major powers like Germany and France in a weak position, making it more challenging to conduct politics in the bloc.
Moreover, the euro suffered gains as the dollar strengthened after Friday’s non-farm payrolls report. US employers hired more people than expected in May, raising doubts about a slowing labor market. In the US, 272,000 more jobs were created last month, well above expectations for 185,000. This was confirmation that the resilience of the labor market remained.
The previous report raised expectations that the Fed would cut rates as it showed a huge shortfall in job growth. However, in May the economy returned to creating many jobs that are driving up prices. As a result, markets have reduced expectations for a rate cut in 2024 from 50 to 35 basis points. At the same time, the chances of a reduction in September dropped from 70% to 50%.
EUR/USD key events today
Investors are not expecting key events today. Accordingly, they will continue to absorb recent economic and political developments in the US and the Eurozone.
Technical Outlook EUR/USD: Bears confirm new direction with gap below 1.0800
On the technical side, the EUR/USD price confirmed a new direction after the outbreak of consolidation. The previous bullish trend was paused and the price started to trade sideways, with support at 1.0800 and resistance at 1.0900.
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During this period of consolidation, the price broke the 30-SMA, while the RSI continued to break the key 50 mark. Moreover, the RSI made a slight bearish divergence with the price, showing weaker bullish momentum. This allowed the bears to take control with solid momentum, leading to a gap below the support level at 1.0800. Bears are now targeting the support level of 1.0725.
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