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Will the EUR/USD pair stay within 1.06? Perhaps this is the main intrigue of the upcoming week. The weekly EUR/USD chart shows that the price has been falling for the third consecutive week. At the beginning of June, the bulls were testing the 9th figure, while at the end of last week, the bears tested the low at 1.0672. Although the price retreated at the end of Friday, the EUR/USD bears still had the advantage (the opening price of the week was 1.0703, the closing price was 1.0692).
To continue the downward trend, sellers need to push through the support level of 1.0670 (the lower line of the Bollinger Bands indicator on the D1 timeframe), which will open the way for the price to reach the next barrier at 1.0620 (the lower line of the Bollinger Bands on the W1 timeframe). From there, the 1.05 level is within reach. Therefore, it's crucial for the EUR/USD bears to stay below the 1.0700 target.
Let's take a look at the main events of the upcoming week.
German IFO indices are scheduled for release on the first working day. Economists expects positive results. In particular, the business expectations index in Germany has been rising for four consecutive months. June could be the fifth month in this series. According to forecasts, the index will reach 91.0 (the highest value since April 2023). The business climate index has been at 89.3 for the past two months (the highest value since May 2023). According to forecasts, it should rise to 89.4 in June.
In order for the euro to receive support from these data, the IFO indices must come out at least at the forecast level or in the "green." Otherwise, the single currency will face more pressure, considering the "red tint" of the June PMI and ZEW indices.
Among the key speakers for Monday, we can highlight the speeches of Christopher Waller, a member of the Federal Reserve Board of Governors, Mary Daly, President of the Federal Reserve Bank of San Francisco, Joachim Nagel, President of the Bundesbank, and Isabelle Schnabel, a member of the Executive Board of the European Central Bank.
The most important report for the day will be released during the U.S. trading session. The Consumer Confidence Index for June will be published. The index actively declined for three months (from February to April inclusive), but unexpectedly rose to 102 points in May. The index is expected to decline again in June (to 100.2 points). However, if the gauge reaches 102.00 or higher, the dollar will receive support, as an upward trend will reflect consumer optimism and higher consumer spending.
In addition, the speech of Federal Reserve Board member Michelle Bowman may also warrant investor attention.
For Wednesday, the lineup of events is practically barren for the EUR/USD pair. Data on new home sales in the U.S. may offer some impetus. Sales declined 4.7% in April, but the indicator is expected to show positive dynamics in May (2.3%). A firm growth could provide support for the dollar.
During the European session, the Chief Economist of the ECB, Philip Lane, is scheduled to speak. Recently, his comments provided support for the single currency, saying that the ECB is seeing significant wage increases in some Eurozone countries. However, further rate reductions at its next meeting in July is not guaranteed ("we will not learn more about the dynamics of inflation in the services sector until the July meeting").
On Thursday, the final estimate of US GDP numbers for Q1 will warrant investor attention. According to the initial estimate, the US GDP increased by 1.6% (against a forecast of 2.5%). Following the second estimate, the indicator was revised downwards (1.3%). According to forecasts, the final estimate will match the second, confirming the 1.3% result. The core Personal Consumption Expenditures Index for the first quarter is also expected to meet the forecast (3.6%). If the final estimate is revised upwards (even if it's a minor revision), this will boost the greenback.
In addition, the US economic calendar will also feature the labor market data. The indicator of initial claims for unemployment benefits is at multi-month highs (record growth rates since August 2023), and according to forecasts, a significant increase will also be recorded this week (240,000). A sharp decline in the indicator (220,000 and below) will support the dollar bulls.
On Friday, the US will publish the core PCE index – the most important inflation indicator closely monitored by Federal Reserve members.
The core personal consumption expenditures (PCE) index remained unchanged in April, although some experts expected the index to accelerate. In February, the index fell to 2.8% year-on-year, the slowest pace since April 2021. It remained at the same level in March. According to some analysts, the index could have accelerated to 2.9% in April, but in fact, it remained at 2.8% for the third consecutive month. Forecasts suggest that it will still move lower to 2.7% in May. If, contrary to expectations, the index accelerates, the dollar will strengthen across the board, as this would cast doubt on the prospects for a rate cut in September. Some Fed members (like Kashkari) are already saying that the first round of rate cuts will not happen "before December." An increase in the core PCE index will strengthen the hawkish sentiment at the Fed.
Overall, the upcoming week is not filled with significant events. However, the fundamental events may still provide some surprises. For instance, if the US Consumer Confidence Index shows positive dynamics instead of the forecasted decline. If the US GDP data for the first quarter is unexpectedly revised upwards. And, of course, if the core PCE index comes out in the "green." The dollar may receive support from these reports, and the EUR/USD bears may consolidate around the 1.06 level.
Technically, on the daily chart, the pair is between the middle and lower Bollinger Bands lines, and below all the lines of the Ichimoku indicator, which shows a bearish Parade of Lines signal. All this indicates that short positions should be prioritized. The first target is the support level of 1.0670 (the lower Bollinger Bands line on D1). The main target is 1.0620 (the lower Bollinger Bands line on W1).
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