The Retail Sales data is scheduled for release at 12:30 GMT on Tuesday. With the US Dollar recovering ground to reach a monthly high in the wake of mounting US default fears and looming banking sector concerns, the EUR/USD pair remains vulnerable to more downside risks below the 1.0900 psychological mark. Stronger-than-expected US Retail Sales data is likely to help ease economic worries, in turn, lifting the main currency pair at the expense of the Greenback.
On the other hand, weaker Retail Sales details are likely to rekindle recession fears while reinforcing the market’s expectations of a US Federal Reserve (Fed) rate cut as early as July. Worries over a potential economic downturn could provide a fresh leg in the ongoing recovery of the safe-haven US Dollar.
At the moment, markets are pricing in an 82% chance of the Federal Reserve holding rates at the current level in June while maintaining a 33% chance of a rate cut in July.
Heading into the key release, the US Dollar is struggling to extend last week’s rally, as risk sentiment has somewhat improved after US President Joe Biden said over the weekend that the talks with Congress on raising the US government's debt limit were moving along. President Biden added that more will be known about their progress in the next two days.
US President Biden will meet with the congressional leaders on Tuesday for talks on a plan to raise the nation's debt limit and avoid a catastrophic default.
Meanwhile, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “Having breached the critical 21-Day Moving Average (DMA) support last week, the selling interest around the EUR/USD pair remains unabated, as the pair took out the bullish 50 DMA cushion on Monday, The 14-day Relative Strength Index (RSI) is holding well below the midline, suggesting that there is more room to the downside.
Dhwani also outlines important technical levels to trade the EUR/USD pair: “On the upside, EUR/USD buyers need acceptance above the bullish 50 DMA support-turned resistance to initiate any meaningful recovery toward 1.0950 psychological level. Conversely, immediate support awaits at Tuesday’s low of 1.0845, below which a sharp sell-off toward the ascending 100 DMA at 1.0804 cannot be ruled out.”
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