Euro resumes the upside and re-targets recent monthly tops around 1.0970

• Euro reverses two consecutive daily declines and regains traction.
• Stocks markets in Europe opens slightly offered on Tuesday.
• The improvement in the risk complex helps the pair so far.
• US traders returns to their desks following Monday’s holiday.
• Investors’ attention remains on the Fed, ECB future moves.
• Cautiousness is expected to pick up ahead of Powell’s testimonies.

The European currency (EUR) has gained some upward momentum, prompting EUR/USD to ignore two consecutive daily declines and resume its recent upward trend on turnaround Tuesday.

This improved sentiment towards riskier assets can be attributed in part to the People's Bank of China's (PBoC) recent decision to cut its 1-year medium-term lending facility (MLF) by 10 bps, aimed at bolstering the Chinese economy as it emerges from the pandemic.

Investors are closely monitoring the potential interest rate decisions by the Federal Reserve and the European Central Bank (ECB), with both expected to resume their hiking campaigns in July.

In Germany, Producer Prices declined by 1.4% MoM in May but rose by 1.0% YoY, while Current Account and Construction Output data will be released in the broader Euroland before speeches by ECB's Board members E. McCaul and L. De Guindos.

In the US, the housing sector will be the primary focus, with speeches by St. Louis Fed member J. Bullard (a hawkish 2025 voter) and NY Fed member J. Williams (a centrist permanent voter) also on the agenda.

Daily digest market movers: Euro bulls regain control of the sentiment

• The renewal of market optimism puts pressure on the US dollar.
• The PBoC lowers the 1-year medium-term lending facility (MLF) to support the ongoing slow economic rebound.
• The testimonies of the Federal Reserve's Chair, J. Powell, will be the significant events to watch later this week.
• Currently, the primary factor influencing the price movement of the currency pair is the divergence in policies between the ECB and the Fed.

Technical Analysis: Focus re-shifts to 1.1000

EUR/USD has pulled back slightly from its recent monthly high of 1.0970, which was reached on June 16. In order to continue its upward momentum, the EUR must quickly surpass this level, potentially allowing it to reach the psychological barrier of 1.1000. Further resistance levels include the 2023 high of 1.1095 (April 26), the round level of 1.1100, and the weekly high of 1.1184 (March 31, 2022), which is supported by the 200-week SMA, currently at 1.1181.

In the event that the bears take control, there is an interim contention at the 55-day SMA at 1.0881. Should this level be breached, there are no significant support levels until the May low of 1.0635 (May 31), followed by the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).