With the dollar index looking strong ahead of what is a key week for US corporate and macro data, any negative sentiment in relation to tougher sanctions on Russia may lend additional support to the greenback ahead of the pound and the euro. The Federal Open Market Committee potentially voting for additional tapering of the current quantitative easing programme this week could also serve to underpin the dollar.
$1.3440 capping EUR/USD upside
US services PMI is expected to show additional growth and remain firmly in expansion, albeit at a slightly lower level from June’s 61.0 print.
Once the lynchpin of the US economic rebound, the housing sector looked a little tired in the first part of 2014. The rebound in May came as a result of lower mortgage rates and increased inventory accelerating the market. This month is expected to be a little softer.
With the euro below the $1.3470 level, there does seem to be an increased bias to additional downside for the single currency. There appears to be a minor base setting in around $1.3425, and the pair is trapped in a tight range with $1.3440 capping upside in the short term. A break through $1.3420 (Friday’s lows) would put the single currency on a move towards $1.34.
The selloff is looking a tad oversold on the daily chart so a close through $1.3440 could see a bounce back towards $1.3470-80.