EURUSD On Course For Third Successive Weekly Gain With More Fuel In the Tank

Summary:
• The turnaround in French elections and soft US inflation figures have set the stage for EURUSD to extend its gains well into next week.

EURUSD stayed on the uptrend for the third consecutive session on Friday, supported by soft US inflation data. The pair was up by 0.2 percent and traded at 1.0889 in the intraday session to bring its weekly gains to 0.4 percent. That put the euro on course for the third consecutive weekly win against the dollar for the first time since mid-May.

Multiple factors have combined to sustain the euro in its recent winning streak against the US dollar. First, the failure by French far-right National Rally (RN) to win the second round of the country’s snap parliamentary elections boosted investor confidence in the Eurozone’s second-largest economy. In a surprise turn of events, President Emmanuel Macron’s centrist alliance is now set to form a coalition government with Jean-Luc Mélenchon’s New Popular Front.

Also, the Eurozone’s inflation rate has not gone down as fast as previously expected, easing the pressure on ECB policymakers to announce rate cuts this quarter.  In the latest development, France’s CPI in June came in at 2.2 percent YoY, higher than the forecast estimate of 2.1 percent. The country’s Harmonised Index of Consumer Prices (HICP) rose to 0.2 percent in June, against analysts’ forecast, which had projected the figure to remain unchanged at 0.1 percent. Germany’s inflation figures released on Thursday also support the EURUSD pair after the June CPI read 2.2 percent and the HICP came in at 2.5 percent YoY to match forecasts.

The decline in the US inflation rate in June as per the CPI readings released on Thursday provide propulsion for the euro against the dollar, and could see EURUSD register further gains well into next week.

Technical analysis

The EURUSD currency pair will likely stay on the upside if it maintains action above the 1.0886 pivot mark. The first resistance will likely come at 1.0893, but further control by the buyers could breach the barrier and send the pair to test 1.0900. Alternatively, a move below 1.0886 will favour the sellers to take control. They will likely find the first support at 1.0882, beyond which extended control could invalidate the upside and send EURUSD lower to test 1.0878.