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Jun 27 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Hits 11-Day High Into Month-End, Data Vigil

By Randolph Donney  —  Jun 27 - 02:35 PM

The dollar weakened modestly on Monday against the euro and sterling as investors squared up frothy gains in the U.S. currency recently while trying to determine how much more the Fed could raise rates beyond what markets have already discounted.

durable goods orders beat forecast nL1N2YE0VA giving Treasury yields a push higher along with supply from Monday's 2-year and 5-year Treasury auctions.

Pending home sales unexpectedly rebounded 0.7% against a 3.7% drop forecast, but this comes after an 18.4% plunge over the last seven months and a 13.6% drop from year ago to levels.

The index is now at readings similar to those seen before the pandemic nW1N2YE02Y, but 30-year mortgage rates are at their highest since 2008 and median home prices are up 14.8% from last May, so the bias is for further softening.

This week's main data focus will be on U.S. PCE, income, spending and saving on Thursday and Friday's euro zone inflation report, the results of which should guide Fed and ECB rate hike expectations.

Two-year bund-Treasury yield spreads consolidated in the middle of the range between May's lows and June's highs, leaving EUR/USD near the middle of its May-June ranges.

EUR/USD was up 0.34%, again probing the daily cloud cover 30-day moving average resistance, but not yet the 61.8% Fibo of the May 30 to June 15 drop and 55-DMA at 1.0624.

June, May and 2017's lows at 1.0359/49/40 remain the major base should the ECB be unable to raise rates as much as currently priced in.

Sterling was marginally higher as part of the dollar's softer tone, but still consolidating its mid-June rebound below the 21-DMA, while EUR/GBP gained 0.26% as doubts persist about the pace of further BoE rate hikes nL1N2YE15K.

USD/JPY was up 0.16% with the help of higher Treasury yields versus BOJ restricted JGB yields.
Last week's correction lows held the 23.6% Fibo of the May-June rally at 134.27.

A series of higher swing lows since then and lack of daily closes below the 10-DMA show demand on dips.
A close above Monday's current high at 135.55 on EBS by the 100-hour moving average would increase the likelihood of last week's twin 24-year peaks at 136.71 being retested next nL1N2YE0Y8.

The dollar was mixed against high-beta currencies.

Bitcoin and ether were little changed, still consolidating this year's fall from grace.

There will be some focus on the ECB's forum on central banking in Portugal nL1N2YE0E2, the NATO meeting in Spain nL8N2YE2SP and G7 summit in Germany nL8N2YE1L9 into midweek, all within the context of repercussions of the war in Ukraine nS8N2VD0EI.

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Refinitiv IFR Research/Market Commentary


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