30.06.202613:15 Forex Analysis & Reviews: EUR/USD – June 30th: ECB Continues Monetary Tightening Amid Inflation Risks

On Monday, EUR/USD posted a slight gain, but bulls failed for the second time to hold above the 100.0% retracement level at 1.1409. As a result, a sustained move below 1.1409 keeps the door open for a renewed decline toward the 127.2% Fibonacci level at 1.1290. A third close above 1.1409 would again favor the euro and could support a moderate recovery toward the 76.4% retracement level at 1.1514.

The wave structure on the hourly chart remains bearish. The last completed downward wave broke below the previous low, while the most recent upward wave failed to break above the prior high. Geopolitical conditions have improved significantly in recent weeks, as the Middle East conflict has at least been paused, and Iran and the United States have signed some form of agreement. However, both the Federal Reserve and renewed tensions between Iran and the U.S. have contributed to a new strengthening of the U.S. dollar, as the agreement has not led to any meaningful progress in negotiations.

Monday's information flow was very limited. The only notable event came late in the evening, when European Central Bank President Christine Lagarde delivered remarks, taking a neutral stance on monetary policy. She stated that she is uncertain about the resolution of the Middle East conflict and therefore prefers not to draw premature conclusions. According to Lagarde, the fight against inflation will continue even if interest rates need to be raised further at the expense of economic growth. This suggests that another policy tightening is likely in July, although the decision will depend on the next eurozone inflation report. If inflation continues to accelerate, there is a 90% probability of another rate hike.

Unfortunately for the euro, ECB tightening does not necessarily provide support for the currency. The market remains focused on geopolitical risks and Federal Reserve policy tightening. These two factors continue to push EUR/USD lower while strengthening the U.S. dollar. Other factors are largely being ignored by the market.

On the 4-hour chart, the pair has consolidated below the 100.0% retracement level at 1.1411, allowing traders to expect further euro weakness. A bullish divergence on the CCI indicator and overbought conditions on the RSI have temporarily slowed bearish momentum. However, a sustained move above 1.1411 would open the way for a stronger euro recovery and a return into the broader downtrend channel.

Commitments of Traders (COT) Report

During the latest reporting week, professional traders opened 19,327 long positions and 23,522 short positions. Over the seven weeks in February and March, the strong bullish dominance disappeared due to the war in Iran. Over the past thirteen weeks, positioning has normalized as hostilities in the Middle East have paused, with bulls once again gaining a slight advantage. Total long positions held by speculators now stand at approximately 247,000, while short positions total around 217,000.

Overall, on a longer-term horizon, large players continue to show interest in the euro. However, global geopolitical developments, which have been abundant in recent years, continue to influence investor sentiment. At present, attention remains focused on the Middle East, where the conflict has been paused and serious negotiations are underway that could potentially lead to a long-term peace agreement. However, the market is currently ignoring improvements in geopolitics, as well as other factors that could support the euro.

Economic Calendar (U.S. and Eurozone)

• Germany – Retail Sales (06:00 UTC)
• Germany – Unemployment Rate (07:55 UTC)
• Germany – Consumer Price Index (12:00 UTC)
• United States – JOLTS Job Openings (14:00 UTC)

The June 30 economic calendar includes four releases, none of which are considered high impact. Therefore, macroeconomic data may have a moderate influence on market sentiment during Tuesday's session.

EUR/USD Forecast and Trading Recommendations

Long positions may be considered today if the pair consolidates above 1.1409 on the hourly chart, with a target at 1.1514. Short positions were previously considered on a sustained move below 1.1409, targeting 1.1290.

Fibonacci grids are based on the 1.1409–1.1850 range on the hourly chart and the 1.1411–1.1850 range on the 4-hour chart.