- Elections in France put the far-right National Rally party in first position.
- ECB policymakers remain confident that inflation will reach the target.
- The US core PCE price index eased from the previous month.
The EUR/USD forecast leans bullish as the euro rises after round one of the French elections. Meanwhile, the dollar was on the back foot after inflation data in the previous session raised bets for a Fed cut in September.
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On Sunday, elections in France put the far-right National Rally party in first position. However, the win was by a smaller margin than expected, supporting the euro. If the far right performs poorly, there will be less fear of a financial crisis. The euro has fallen in recent sessions since Macron announced a snap election that created a cloud of political uncertainty. However, after the election, the EUR/USD pair reached a two-week high before pulling back.
Elsewhere, ECB policymakers remain confident that inflation will reach the central bank’s target. Consequently, the central bank will likely continue cutting interest rates. Meanwhile, the Fed is yet to start its cutting cycle.
The dollar was weak after data on Friday showed weaker inflation in May. The US core PCE price index met expectations at 2.6%, easing from the previous month. This gave investors more confidence that the Fed will cut in September. However, policymakers might continue watching incoming data for more evidence that the decline to 2% will continue.
Currently, markets are pricing a 63% chance that the Fed will start lowering borrowing costs in September. This might change this week after the US nonfarm payrolls report, which is due on Friday.
EUR/USD key events today
- German Prelim CPI m/m
- US ISM Manufacturing PMI
EUR/USD technical forecast: Bulls break range above 1.0750
On the technical side, the EUR/USD price has gapped up and broken above the 1.0750 resistance level. Moreover, the price has broken out of its consolidation area between the 1.0675 support and the 1.0750 resistance.
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The previous bearish move showed weakness when the price punctured the 30-SMA resistance. At the same time, the RSI made a bullish divergence, showing fading bearish momentum.
Afterwards, the price entered an area of consolidation, where bulls and bears fought for control. Bulls won when the price gapped up, showing massive bullish momentum, before breaking above 1.0750. Bulls might now target the 1.0850 resistance level.
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- Source: https://www.forexcrunch.com/blog/2024/07/01/eur-usd-forecast-french-election-results-lift-euro/
