EUR/USD clings to the 1.0500 figure, on broad US dollar weakness, ahead of Fed’s Powell

• The absence of North American traders kept the EUR/USD subdued in a narrow range.
• Fed Waller agrees on a 75 bps rate hike in July.
• ECB’s Lagarde foresees hiking rates in July and September, although the latter would depend on the medium-term inflation outlook.
• EUR/USD Price Forecast: Bearish harami candle pattern and Fed-ECB interest rate differential benefits the greenback.

The shared currency is almost flat as the Asian session begins, after on Monday, remained confined to the 1.0472-1.0545 range, on a thin liquidity trading session due to a bank holiday in the US. At the time of writing, the EUR/USD is trading at 1.0512, forming a bearish harami candle chart pattern that might drag prices down towards the June 17 low at 1.0444.

Sentiment remains upbeat, as shown by Asian equity futures rising. The absence of US traders kept the greenback on the back foot, as shown by the US Dollar Index, falling 0.16%, down at 104.483. Despite staying above the 3% threshold, US Treasury yields remain downward pressured.

Fed and ECB speakers dominated headlines

Elsewhere, Fed speakers commenced crossing wires. Throughout the weekend, Fed member Christopher Waller backed a July 75 bps rate hike mentioning that inflation needs to be brought down, regardless of the cause. Meanwhile, Cleveland’s Fed President Loretta Mester noted that inflation would not reach the Fed’s 2% target while mentioning that although the Fed’s Summary of Economic Projections (SEP) estimates that the US economy slowing down, she said that she’s not “predicting a recession.”

The ECB President Christine Lagarde said she expects to raise the key ECB interest rates again in September after a 25bp hike in July, while the calibration of the September hike will depend on the updated medium-term inflation outlook. Also, the ECB’s Chief Economist Philip Lane said that very high inflation means there is a risk inflation psychology could take hold and said the larger increment for a rate increase in September does not represent a red alert assessment of inflation.

Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision, and there is no preview beyond September of what will be the appropriate pace of tightening.

In the week ahead, an absent Eurozone economic calendar will leave traders adrift to the US economic docket. The US docket will feature the Chicago Fed National Activity Index for May, Existing Home Sales, and the Richmond Fed Thomas Barkin, which will cross wires twice.

EUR/USD Price Forecast: Technical outlook

The EUR/USD is still downward biased. Although the major consolidated in the 1.0472-1.0545 range in the last three days, the interest rate differential between the ECB and the Fed benefits the greenback.

Therefore, the EUR/USD will remain downward pressured. With that said, the EUR/USD first support would be the June 17 daily low at 1.0444. A breach of the latter would expose the June 16 low at 1.0380, followed by the YTD low at 1.0348.