Fundamental Analysis
This week we will have a few high-impact data releases from the economic calendar. Still, the focus will be on several speeches by Fed officials, with five out of eight appearances scheduled featuring hawkish members. This will drive a strong pushback against market expectations of two rate cuts this year. This hawkish stance is expected to bolster the strength of the dollar, adding momentum to its already strong performance in the first half of the year.
Additionally, the dollar could benefit from European political risks ahead of the French elections; Le Pen’s advantage over Macron and weak June PMI data in Europe increase investor anxiety.
This week we will have the following USD-related releases from the economic calendar:
- CB Consumer Confidence (June). Tuesday 25
- New Home Sales (May). Wednesday 26
- Durable Goods Orders (monthly) (May). Thursday 27
- Final Q1 GDP. Thursday 27
- Unemployment Claims. Thursday 27
- PCE Price Index (May). Friday 28.
PCE data is expected to be lower than last month, so to cause a more aggressive downward reaction, a significantly lower PCE is needed to shift the market trend of speculating on two rate cuts this year and signalling an imminent cut for September.
Technical Analysis
Dollar Index (DXY), H4
- Supply Zones (Sells): 105.85 and 106.21
- Demand Zones (Buys): 105.96, 105.42, 104.88
The dollar’s bearish correction came to an end after reaching a new higher high last week at 105.52. The opening correction towards the last uncovered point of control (POC) at 105.06, which is a demand zone for buying, will likely be defended by buyers. This defense could trigger a rally towards the opening at 105.44 and the Asian supply zone. We will then evaluate the strength of the ascent and price behaviour in that zone, as the next price action depends on it.
With a stronger rally breaking the Asian supply zone indicated at the opening, we will see an impulse seeking to break the May 9 resistance, the uncovered POC at 106.04, and only after its breakout consider the weekly target at the May resistance of 106.33.
On the other hand, a decisive break of the POC at 105.06 may encourage a retracement towards the area near the 104.69 support, observing a possible bullish rebound towards the opening sell zone at 105.43, and after its breakout extend buys towards 106.04.
EURUSD, H3
- Supply Zones (Sells): 1.0745 / 1.0806
- Demand Zones (Buys): 1.0691
After reaching the average daily range high (ADR High) and a weekly supply zone, a retracement towards the Asian POC at 1.0691 is expected, from where new buys will be considered. The extension of the bullish correction will be observed with quotes decisively breaking the supply zone between 1.0750 and 1.0633, confirming the intraday bullish reversal with a weekly target at 1.08.
However, failure to break above 1.0750 and a quick descent below 1.0691 will indicate renewed bearish strength of the pair towards May support at 1.0649 and 1.0624 more extended.
*Uncovered POC: POC = Point of Control: It is the level or zone where the highest concentration of volume occurred. If previously, a bearish movement originated from it, it is considered a sell zone and forms a resistance zone. Conversely, if previously, an upward impulse originated from it, it is considered a buy zone, usually located at lows, forming support zones.
