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Jul 10 - 01:55 PM

EUR/USD - COMMENT-Weak US PPI Puts EUR/USD Spotlight On Fed

By Christopher Romano  —  Jul 10 - 10:55 AM

EUR/USD's slide from Thursday's 1.1371 peak may have already run its course nL1N2EG11M after weak U.S. PPI data returned focus to Fed policy expectations and the bearish outlook for U.S. rates weighing on the dollar.

Fed funds futures prices added to gains after the below-forecast June PPI nAQN02SOW1, pulling expectations for negative Fed rates to May 2021 FFK1 and driving the dollar =USD broadly lower.

Optimism about Gilead Sciences' remdesivir study nL4N2EH2TC led investors to shun the dollar in favor of riskier assets like equities ESv1 and commodities, intensifying the greenback's dimming allure.

Options bolstered the view that EUR/USD could remain buoyant.
Massive option expiries in the 1.1300-1.1400 range over the next two week nL1N2EH0KV should act magnetically and help limit any EUR/USD downside.

Technicals also implied downside risks were limited.
Daily and monthly RSIs indicated upside momentum remained intact and the 21-day moving average lent support, as did old trend line resistance from the June monthly high.

If risk remains upbeat, dollar selling should prevail and EUR/USD will likely test the 1.1500 area.

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Source:
Refinitiv IFR Research/Market Commentary

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