EUR/USD, Oil Forecast: Two trades to watch

EUR/USD struggles with French elections and US data in focus

Political & economic uncertainty limit the euro
US consumer confidence data is due
EUR/USD struggles at 1.0725

The Euro is struggling to extend yesterday's gains in a cautious mood ahead of this weekend's elections in France. The latest French polls show that the far-right National Rally party has widened its lead ahead of the first round of voting on Sunday. Meanwhile, President Macron’s party is in third place. Political uncertainty is deepening, which could limit the euro's upside.

Meanwhile, the eurozone economic calendar is relatively quiet today. However, the outlook for the region is uncertain amid signs that the economic recovery is losing momentum.

Data yesterday showed that the German Ifo business climate declined to 88.6 in June, defying expectations of a rise to 89.7. This suggests that the German economy is having trouble overcoming stagnation.

The data comes after PMI data last week showed slowing economic activity in the region. The weak economic outlook for the eurozone economy suggests further rate cuts from the ECB, which reduced rates by 25 basis points in early June. So far, officials have resisted committing to further rate cuts amid concerns over an uptick in volatile inflation.

The USD is under pressure after comments from Chicago Fed President Goolsbee, who said that with more inflation readings like May, the central bank will be able to start cutting interest rates. He also warned about tight monetary policy. Goolsbee’s slightly more dovish comments support the market's expectations that the Federal Reserve could cut interest rates more than once this year despite the Fed's dot plot pointing to just one rate cut.

Attention will now turn to euros and U.S. consumer confidence data, which is expected to fall slightly to 100, down from 102. The data comes after weaker-than-expected retail sales last weekend amid signs that the US labour market is starting to soften, too.

The main focus for the US dollar this week will be Friday's US core PCE, which could give further clues about when the Fed may start cutting interest rates.

EUR/USD forecast – technical analysis

EUR/USD trades back within the descending channel. The price has recovered from a low of 1.0670 but has so far failed to rise above the falling trendline, which, combined with the RSI below 50, supports further downside.

Sellers will look to take out 1.07 round number to re-test 1.0670 the June low, to bring 1.06 into play.

Any recovery will need to rise above the upper band of the descending channel and the 200 SMA at 1.0785 to bring 1.08 into focus.

Oil steadies ahead of API stock pile data

Oil steadies after strong gains in recent sessions
Oil API stock pile data is expected to show a 3M barrel drawdown
Oil tests resistance at 81.50

Oil prices held steady on Tuesday after rising in the previous session, boosted by optimism surrounding increased fuel demand this summer. However, gains are being limited by some caution ahead of Friday's inflation data.

Signs that gasoline demand is rising have supported the oil prices as oil and fuel stockpiles have declined in the US, the world's largest oil consumer, as the summer driving season ramps up.

API crude oil stockpiles will be the focus today. Inventories are expected to fall by 3 million barrels in the week ending June 21, and gasoline stocks are also expected to have declined.

Still, investors are cautious about potential gains amid concerns that sticky inflation and high interest rates for longer could limit fuel consumption.

The release of core PCE data on Friday, the Fed's preferred gauge for inflation, will offer more clarity into the outlook for interest rates. Persistent inflation and high interest rate cuts could limit growth and pressurise oil prices.

Meanwhile, geopolitical tensions are also supporting oil prices. Ukraine continues its attacks on Russian oil infrastructure, creating nerves around the fuel supply.

In the Middle East, Israel has shrugged off the latest version of a possible ceasefire between Israeli forces and the Palestinian Hamas, keeping oil prices underpinned amid the prospect of the ongoing Gaza conflict spilling into neighboring countries.

Oil forecast – technical analysis

Oil has extended its rebound from 72.60, the June low, and is testing resistance at 81.50, the May high. Buyers, supported by the RSI above 50, will look to extend the run-up towards 84.45, the late April high. A rise above here will bring 87.60, the 2024 high, into focus.

On the downside, immediate support can be seen at 79.70 of the 200 SMA. Below here static support at 77.60.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.