The EUR/USD pair managed to trim some of its recent losses, settling around the 1.1450 mark as demand for the US Dollar (USD) eased. A combination of cooling Middle East tensions and disappointing US economic data triggered a pullback in the greenback, reducing the probability of further Federal Reserve rate hikes.

Fundamental Drivers: Easing Inflation and Soft Labor Data

1. Geopolitical Easing & Lower Oil Prices

Crude oil prices (Brent and WTI) cooled down to pre-war levels, indicating a normalization of maritime traffic through the crucial Strait of Hormuz. Lower oil prices have significantly reduced global inflationary fears. Furthermore, peace talks between the US and Iran are temporarily paused as Tehran observes a massive funeral procession for the late Supreme Leader, Ayatollah Ali Khamenei (who passed away on February 28), which is expected to last until July 9.

2. Confident Eurozone Policymakers

At the ECB Forum on Central Banking in Sintra, Portugal, ECB President Christine Lagarde expressed confidence in Europe's resilience, noting the economy can handle rate hikes without facing stagflation. Data backed her confidence:

  • Germany June CPI: Softened to 2.3% (from 2.6% in May).

  • Eurozone June HICP: Dropped to 2.8% (below the 3.0% forecast and 3.2% previous).

With inflation prints melting, the ECB is widely expected to hold interest rates steady for a prolonged period.

3. Disappointing US Employment

The US macro calendar heavily weighed down the Greenback:

  • ADP Private Payrolls: Added just 98k jobs in June (vs. 122k previous).

  • Nonfarm Payrolls (NFP): Shocked markets by adding only 57k jobs against the 110k expected, alongside a steep downward revision to May’s data (129k from 172k).

  • Fed Stance: Fed Chairman Kevin Warsh emphasized price stability but offered no forward guidance, leaving traders to slash 2026 Fed rate hike bets significantly following the weak NFP data.

Technical Outlook: Sellers Still Hold the Reins

Despite the weekly corrective bounce, the technical setup confirms that bears remain in control of the EUR/USD pair.

Technical Indicator Level / Position Market Signal
Current Spot Price ~1.1450 Corrective bounce facing overhead supply
20-day SMA 1.1470 Immediate strong resistance
100-day / 200-day SMA 1.1623 / 1.1654 Major bearish ceiling
RSI (Daily) ~43 Downward momentum persists, though losing steam

On the weekly chart, the pair remains capped well below its 20-week SMA ($1.1611$), keeping the broader risk skewed to the downside.

Key Levels to Watch:

  • Resistance: Immediate static resistance sits at 1.1470. A decisive break above 1.1600 - 1.1650 is required to invalidate the broader bearish trend.

  • Support: Immediate support is at the recent multi-week low of 1.1324, followed by the 100-week SMA at 1.1296. A break lower opens the door to the 1.1000 psychological milestone.

The Week Ahead

Investors will look for fresh direction from the upcoming EU May Retail Sales, US June ISM Services PMI, and the highly anticipated FOMC Meeting Minutes on Wednesday. Central bankers from both sides of the Atlantic will also speak, providing vital clues ahead of next month's crucial policy decisions.