EUR/USD gains as Powell acknowledges upside risks to US labor market strength

• 
  EUR/USD
  holds
  gains
  in
  a
  tight
  range
  above
  1.0800
  due
  to
  multiple
  tailwinds.
• 
  Fed
  Powell’s
  caution
  on
  the
  US
  labor
  market
  pushes
  the
  US
  Dollar
  on
  the
  backfoot.
• 
  The
  Euro
  gains
  as
  the
  far
  right’s
  defeat
  eases
  upside
  risks
  to
  widening
  French
  financial
  crisis.

EUR/USD
turns
sideways
around
1.0800
in
Wednesday’s
European
session
after
a
modest
corrective
move
from
an
almost
four-week
high
of
1.0850.
The
major
currency
pair
shifts
to
the
sidelines
as
investors
await
the

United
States
(US)
Consumer
Price
Index
(CPI)
data
for
June,
which
will
be
published
on
Thursday.

Economists
expect
that
core
inflation,
which
excludes
volatile
food
and
energy
items,
grew
steadily
by
0.2%
and
3.4%
on
a
monthly
and
annual
basis,
respectively,
in
June.
Annual
headline
inflation
is
estimated
to
have
decelerated
to
3.1%
from
May’s
reading
of
3.3%,
while
the
monthly
figure
is
expected
to
have
grown
by
0.1%
after
remaining
unchanged
previously.

The
inflation
data
will
provide
cues
as
to
whether
current
expectations
that
the

Federal
Reserve
(Fed)
will
start
reducing
interest
rates
from
the
September
meeting
are
appropriate.

Meanwhile,
Fed
Chair
Jerome
Powell
signaled
in
his
commentaries
at
the
semi-annual
Congressional
testimony
on
Tuesday
that
rate
cuts
are
not
appropriate
until
policymakers
gain
significant
confidence
that
inflation
is
on
course
to
return
to
the
desired
rate
of
2%.

However,
Powell
warned
about
easing
US
economic
strength
as
the
labor
market
loses
momentum.
Powell
said
“Labor
market
conditions
have
cooled
considerably
compared
to
where
they
were
two
years
ago,”
and
added
that
the
US
“is
no
longer
an
overheated
economy.”

Daily
digest
market
movers:
EUR/USD
rises as
ECB
refrains
committing
a
pre-defined
rate-cut
path

• EUR/USD
  holds
  onto
  gains
  above
  1.0800,
  inspired
  by
  a
  weak
  US
  Dollar
  (USD)
  and
  a
  decent
  recovery
  in
  the
  Euro,
  as
  the
  Marine
  Le
  Pen-led
  far-right
  National
  Rally
  fails
  to
  gain
  an
  absolute
  majority
  in
  French
  elections.
  The
  US
  Dollar
  Index
  (DXY),
  which
  tracks
  the
  Greenback’s
  value
  against
  six
  major
  currencies,
  faces
  pressure
  to
  extend
  recovery
  above
  105.20.
• The
  far-right
  misses
  an
  outright
  majority
  despite
  leading
  in
  the
  first
  round,
  resulting
  in
  diminished
  fears
  of
  a
  widening
  French
  financial
  crisis.
  However,
  uncertainty
  about
  fiscal
  adjustments
  and
  the
  distribution
  of
  ministries
  remains
  high
  as
  the
  economy
  will
  be
  administered
  by
  a
  coalition
  government.
  Economists
  expect
  French
  President
  Emmanuel
  Macron’s
  centrist
  alliance
  will
  join
  hands
  with
  the
  left
  wing,
  also
  known
  as
  the
  New
  Popular
  Front,
  led
  by
  Jean-Luc
  Mélenchon.
• Meanwhile,
  sliding
  expectations
  of
  subsequent
  rate
  cuts
  by
  the
  European
  Central
  Bank
  (ECB)
  keep
  the
  Euro
  on
  the
  front
  foot.
  ECB
  policymakers
  continue
  to
  refrain
  from
  committing
  to
  a
  pre-defined
  rate-cut
  path,
  with
  fears
  that
  an
  aggressive
  policy
  expansionary
  stance
  could
  reverse
  the
  disinflation
  process.
• On
  Tuesday,
  ECB
  governing
  council
  member
  and
  Governor
  of
  the
  Bank
  of
  Italy
  Fabio
  Panetta
  said
  the
  central
  bank
  could
  gradually
  reduce
  interest
  rates
  without
  any
  hiatus
  to
  slowing
  inflationary
  pressures.
  Panetta
  added
  that
  policy
  tightening
  done
  in
  the
  past
  is
  still
  impacting
  demand,
  output,
  and
  inflation.

Technical
Analysis:
EUR/USD
holds
key
EMAs

EUR/USD
trades
in
a
tight
range
slightly
above
the
round-level
support
of
1.0800
as
investors
stay
on
the
sidelines
ahead
of
the
US
CPI
report
for
June.
The
major
currency
pair
stabilizes
above
the
20-day
and
50-day
Exponential
Moving
Averages
(EMAs),
which
trade
around
1.0750
and
1.0770,
respectively.
The
overall
trend
of
the
shared
currency
pair
has
also
strengthened
as
it
has
jumped
above
the
200-day
EMA,
which
trades
around
1.0800.

A
Symmetrical
Triangle
formation
on
the
daily
timeframe
exhibits
a
sharp
volatility
contraction,
which
indicates
low
volume
and
narrow
ticks.

The
14-day
Relative
Strength
Index
(RSI)
reaches
60.00.
Should
the
bullish
momentum
be
triggered
if
it
breaks
above
60.00?