The EUR/USD pair is trading in a flat, at the lower border of the price range 1.2150-1.2250, wherein it is staying since May 18. Last week, the bears of this instrument tried to leave the range, falling to the bottom of 1.21 mark. However, the contradictory Nonfarms did not allow sellers to develop a downward trend.
Unfortunately, buyers also failed in taking full advantage of the situation. The key data on the growth of the US labor market for May was not disappointing, contrary to the April figures – some components of the release came out in the "green zone", showing an unexpected recovery. For example, the unemployment data actually returned to the area of pre-crisis values (5.8%), against experts' forecast of 6%. We were also pleased with the salaries – average hourly earnings rose 2% year-on-year. This is a record growth rate for this indicator. And although all the other components came out in the "red zone", the very fact of the decline in the unemployment rate amid the wage growth did not allow the EUR/USD bulls to return to the area of the 1.22 level. Traders are forced to stand still, waiting for the next information impulses.
Today, the EUR/USD pair can incite the index of sentiment in the business environment in Germany and in Europe as a whole. The corresponding report will be published by the German ZEW Institute. It should be recalled that the latest reports from ZEW were much better than expected. In particular, the German index of business sentiment surged to 84 points – this is the best result in the last 20 years. And today, a positive trend is also expected. The German indicator can update the long-term record again, coming out at 86 points. A similar trend can be demonstrated by the pan-European indicator. In general, the optimism of European entrepreneurs has been consistently growing over the past two months. This is also proven by the PMI indices. French, Italian, as well as pan-European indicators came out in positive zone, reflecting the recovery processes in both the production sector and the service sector. And for the first time since February 2018, the German indicator of economic expectations from the IFO exceeded the 100-point mark. The indicator of business environment conditions similarly pleased buyers of EUR/USD, being at the level of 92 points, which is the best result since April 2019.
If the data from ZEW also comes out in the "green zone" today, thereby exceeding the optimistic forecast values, the European currency will receive some support. But at the same time, a prolonged growth or a prolonged fall from the pair should not be expected. Traders will probably remain cautious, not risking opening large positions in anticipation of key events in the near future. This Thursday, June 10, we will learn the results of the ECB's June meeting. On the same day, the main indicators of US inflation will be published. Given the significance of these events, it can be assumed that the EUR/USD pair will remain in the 100-point range of 1.2150-1.2250, pending the ECB's verdict and the inflation release. In addition, the results of the Fed's June meeting will be announced next week (June 16), whose members will evaluate and comment on the dynamics of the latest inflation releases. It is important that this meeting will take place after the publication of the May consumer price index.
The pair's traders are forced to weaken, as the intrigue remains regarding to the Fed's verdict and the ECB's verdict. For example, the latest data on inflation growth in Germany and in the European region as a whole has strengthened the "hawkish" expectations of investors. The June meeting of the European Central Bank may take place under the sign of a" split", which will clearly be interpreted in favor of the euro.
A similar situation has developed in the United States. If US inflation shows an acceleration again on Thursday, then rumors will return to the market that the Federal Reserve may curtail QE ahead of schedule – especially since some Fed officials allowed such a scenario after the April inflation release.
Thus, the market will remain uncertain in the medium term, which will not allow either the bulls or the bears of EUR/USD to show their full character. The current releases (such as today's ZEW report) will have a limited impact on the pair.
From the technical point of view, the pair on the daily chart is located on the middle line of the Bollinger Bands indicator, which coincides with the Tenkan-sen line. If the pair consolidates above these lines (that is, it breaks through the level of 1.2200), then the price will initially be between the middle and upper lines of the Bollinger Bands, and the Ichimoku indicator will form a bullish signal "Line Parade".
This combination will technically allow buyers to test the next resistance level of 1.2250 (upper line of the Bollinger Bands on D1). If the ZEW indices exceed the expectations of experts today, buyers of EUR/USD will be able to implement the above scenario. However, we can not talk about higher values. Given the proximity of the ECB's June meeting and the release of inflation data, traders are likely to massively take profits at the upper limit of the established price range.