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EUR/USD hovers below 1.18 ahead of EZ CPI, Lagarde & Powell speech

• EZ CPI is expected to rise to 2% vs 1.9% in May
• Lagarde & Powell to speak at Sintra central bankers forum
• EUR/USD trades around a 4-hour high

The EUR/USD is hovering below 1.18 after a nine-day rally, which took the pair to a year-high.
The EUR remains unchanged as investors focus on the ECB's central bankers' summit in Sintra, Portugal, where the chiefs of the world's major central banks, including Lagarde and Powell, will discuss trade, the global economic outlook, and inflation, and may provide hints about the future path for interest rates.
Attention will also be on eurozone inflation figures, which are expected to rise to 2% from 1.9% in May. However, cooler-than-expected CPI readings in Italy and Germany on Monday could indicate a weaker-than-forecast print.
Meanwhile, inflation expectations among euro area consumers eased in May, according to the ECB. Prices are expected to increase by 2.8% over the coming year, down from 3.1% in April. Even so, the ECB remains optimistic that inflation will return to its 2% target this year.
On the trade front, the EU is expected to accept Trump's universal 10% tariff on many of its exports but wants the US to commit to lower rates on some key sectors. The EU is looking to lower the US's 25% tariff on cars and car parts, as well as its 50% tariff on steel, and add a minimum. The EU has until July 9th to clinch a trade agreement.
The U.S. dollar is struggling around a three-year low against its major peers amid renewed concerns about Trump's tax bill, which is expected to add $3.3 trillion to the U.S. fiscal debt load. Meanwhile, President Trump has also expressed frustration surrounding trade talks, with big deals still elusive ahead of the July 9 deadline.
US ISM manufacturing PMI, JOLTS jobless claims, and a speech by Fed Chair Powell are in focus today. Weak data could bolster expectations for a Fed rate cut.
 

EUR/USD forecast – technical analysis

EUR/USD has trended higher YTD, running into resistance at 1.18, a 4-year high. The price trades within an ascending channel and is probing the upper band.  The RSI is overbought so there could be some consolidation.
Buyers will look to extend he bullish trend above 1.18 to 1.19, a level seen in August 2021, and towards 1.20.
Support can be seen around the 1.16 zone, which would negate the near-term uptrend. A break below 1.1450 creates a lower low, changing the structure of the chart.

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USD/JPY slumps on USD weakness as trade, fiscal worries mount

• Trump’s tax cut and spending bill unnerves the market
• US trade deals are slow coming through
• USD/JPY falls to a 2-week low

The USD is struggling around a four-year low versus its major peers as Trump's spending bill raises fiscal worries and amid uncertainties surrounding trade deals, which are hurting risk sentiment.
President Trump's tax cut and spending bill is facing party divisions and is expected to add $3.3 trillion to the national debt is passed. Fiscal concerns have dampened sentiment, prompting some investors to diversify away from the US dollar.
Meanwhile, U.S. trade deals are also in focus as the July 9 deadline approaches. So far, there have not been many agreements, which is also keeping the dollar depressed.
Adding to the dollar's woes, investors have also begun to price in a quicker pace of monetary policy easing by the Federal Reserve following Federal Reserve Chair Jerome Powell's testimony last week. Powell is to speak again today at the ECB annual forum in Sintra.
Manufacturing PMI data and JOLTS job openings are in focus ahead of Thursday's nonfarm payroll report. Any sense of weak data could spur further rate cut expectations, pulling USD lower.
The Japanese yen is gaining against the weaker dollar, reaching its highest level in over 2 weeks, even as tensions surrounding U.S. trade intensified.
Trump threatened to impose new tariffs on Japan, criticizing their stance on importing American rice, and confirmed that a 25% tariff on Japanese cars would remain in place due to the trade imbalance. These comments come at a time when the market is closely watching to see whether Japan can secure a trade deal with Washington before the 24% reciprocal tariff rate takes effect next week.
On the data front, Japan's tankan survey showed a surprise uptick in business morale among large manufacturers in Q2, highlighting resistance despite growing external pressures.
 

USD/JPY forecast – technical analysis

After failing to meaningfully retake 146, USD/JPY has rebounded lower, heading towards the support zone at 142,50. The price has traded within this familiar range since May.
Sellers, supported by the RSI below 50, will look to take out support at 142.50 and extend losses towards 140.00.
Buyers will need to close above 146.00 to create a higher high and open the door to 148.65.

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