EURUSD Price holds parity on hawkish Fedspeak, EU Economic Forecasts eyed

• EURUSD Price reverses the bounce off 20-year low as sour sentiment underpins US dollar’s safe-haven demand.
• Fears of downbeat European Commission Economic Forecasts, Moody’s outlook for Germany and Italy weigh on pair.
• 40-year high US inflation propelled bets for 100 bps rate hike in July.

EURUSD Price remains on the back foot at around 1.0030, after a failed attempt to recover from a nearly two-decade low the previous day. That said, the major currency pair’s rebound from the lowest levels since December 2002 reversed from 1.0122, extending the pullback towards the 1.0000 parity level of late.

The major currency pair portrays the market’s pessimism surrounding the Eurozone economic conditions while also justifying the hawkish Fed bets after the multi-year high US inflation. It’s worth noting, however, that the quarterly economic forecasts from the European Union (EU) appear to be the key for the intraday traders, even if the recession fears could keep bears happy.

Also read: EUR/USD Forecast: Panic takes over post-US CPI data

EURUSD Price drops on US Inflation

US inflation jumped to 40-year high in June.

US inflation, as per the US Consumer Price Index (CPI) for June, jumped to the highest level in 40 years to 9.1% YoY versus 8.8% expected and 8.6% prior. That said, the Core CPI, which excludes volatile food and energy prices, eased to 5.9% from 6% prior but crossed analysts' forecast of 5.8%. The jump in the US price pressure propels the market toward the US dollar demand and weighs on the EURUSD Price. Following the US data, White House (WH) Economic Adviser Brian Deese told CNBC that the CPI data shows the urgency for Congress to pass legislation to spur semiconductor manufacturing in the US, as reported by Reuters. On the other hand, US President Biden mentioned that CPI data is ‘out of data’ as gas prices have fallen.

Hawkish Fed bets also favor bears

The multi-year high US inflation fuelled the market’s bets for hawkish Fed actions in July. Reuters cites CME data to mention the EURUSD Price bears while saying, “They are now pricing in a nearly 80% probability of a full percentage-point rise at the coming meeting, according to an analysis of the contracts by CME Group,” said Reuters. The hawkish Fedbets also gain support from the Fed policymakers as San Francisco Federal Reserve Bank President Mary Daly said that her most likely posture is a 75bp hike in July but a 100bp is possible, as reported by the New York Times. Before that, Richmond Federal Reserve President Thomas Barkin conveyed his support for higher rates in the last meeting while Cleveland Federal Reserve President Loretta Mester also said, “The data on CPI does not suggest a rate hike in July any smaller than that in June.”

Moody’s sounds grim Germany, Italy

Global rating giant Moody's latest outlook for Germany and Italy appears grim. “When looking at Germany and Italy, the immediate economic repercussions of Russia's plan to restrict supply in mid-June are likely to be limited,” said the rating giant. The report also mentioned, “When Russian gas supplies are cut off, negative economic impacts that will increase both countries' debt burdens.”

EU Forecasts eyed

The quarterly readings of the EU Economic Forecasts will be crucial for the EURUSD Price mainly due to the recently downbeat expectations from the bloc’s key economies, namely Germany and Italy. Ahead of the release, Bloomberg hints at the weaker figures while stating the draft report seen. “Gross Domestic Product (GDP) is likely to advance 2.6% this year and 1.4% in 2023 -- down from May predictions for gains of 2.7% and 2.3%,” mentioned Bloomberg. The news also mentioned that Inflation is now seen at 7.6% in 2022 and 4% next year, up from 6.1% and 2.7%.

US PPI also appears important for bears

Following upbeat US CPI, EURUSD traders will also follow the Producer Price Index (PPI) details for immediate directions, other than the EU forecasts. As per the market consensus, the PPI is likely to ease to 10.7% YoY in June from 10.8% prior. More importantly, PPI ex Food & Energy is also expected to edge lower to 8.1% YoY during the stated month, versus 8.3% prior.

EURUSD Price technical outlook

EURUSD Price couldn’t even cross the 5-DMA during the previous day’s corrective pullback, even if the oversold RSI (14) triggered the bounce from the 20-year low.

A failure to cross the immediate DMA joins bearish MACD signals to keep the pair sellers hopeful of refreshing the multi-year low, currently around 0.9998.

In doing so, the pair bears keep eyes on the downward sloping support line from early March, near 0.9975 by the press time.

Following that, the 61.8% Fibonacci Expansion (FE) of the EURUSD Price moves between March 31 and May 30, close to 0.9950, could lure sellers ahead of directing them to the December 2002 low of 0.9860.

On the contrary, a clear upside break of the 5-DMA immediate hurdle, around 1.0100 by the press time, could help the EURUSD Price to aim for the last Thursday’s peak surrounding 1.0220.

However, the pair bears remain hopeful until the quote stays below the previous support line from May 13, close to 1.0380 at the latest.

Key trading levels