EUR/USD Headed Above 1.1400
On a fundamental and technical basis, we believe EUR/USD is headed above 1.1400 this week. Fundamentally, there’s very little data on this week’s Eurozone calendar to alter the uptrend in euro. ECB President Draghi will be speaking but he’s made it clear that they are in wait and see mode because there’s still more stimulus in the pipeline with corporate bond purchases and TLTRO beginning this month. Fed Chair Janet Yellen spoke today and Friday’s surprisingly weak jobs number has made her less eager to raise rates in July. Many economists and investors expected Yellen to look beyond the terrible May jobs reports and repeat that rates will most likely rise in the coming months but instead of doing so, she recognized the disappointment and concern that the latest jobs number causes. She’s also worried about China and Brexit risks. So while the Fed is still thinking about tightening in 2016, a hike is definitely not happening in June and probably not in July either. The lack of supportive comments from Yellen should keep the dollar under pressure and take EUR/USD above 1.1400.
Technically, EUR/USD has now broken above the 20, 50 and 100-day SMAs. It has also moved above the first standard deviation Bollinger Band into our “Buy Zone.” As long as the pair holds above 1.1300, it is poised for a move to its April highs near 1.1450. If it breaks below 1.1300 however, we could see a deeper correction towards 1.1200.