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A Bearish Correction May Be Brewing Beneath the Surface
Central Bank
Economic
Summary:
The RSI has reached the 70 mark, entering overbought territory while forming a bearish divergence. This could be interpreted as a warning signal of a potential downside reversal, which may accelerate the pair’s retreat.
Sell
CLOSEDEURUSD
End Time
1.15766
Entry Price
1.14950
TP
1.16200
SL
1.15291 -0.00218 -0.19%
148
Points
Profit
1.14950
TP
1.15618
CLOSING
1.15766
Entry Price
1.16200
SL
Fresh concerns over the U.S. economy weighed on the dollar after the latest New York Fed data showed a deeper contraction in regional manufacturing activity. The Empire State Manufacturing Index fell sharply to -16.0 in June, down from -9.2 in May and well below market expectations of -5.5. This marked the weakest reading since March's two-year low of -20.0, highlighting deteriorating momentum in the factory sector and adding to fears of a broader regional slowdown.
Meanwhile, U.S. President Donald Trump reaffirmed Washington’s strong support for Israel, stating on Sunday that although he hopes for a resolution between Israel and Iran, “they’ll have to fight it out.” Trump reportedly rejected a proposal from Israeli leadership to strike Iran’s Supreme Leader Ayatollah Ali Khamenei, emphasizing his current stance of keeping the United States from becoming directly involved in the escalating conflict—at least for the time being.
On the economic front, the release of the U.S. Producer Price Index (PPI) for May offered further signs that inflation may be softening. Headline PPI rose 2.6% year-over-year, aligning with economists’ expectations and marginally above April’s figure of 2.5%. However, the core PPI—which excludes food and energy—slipped to 3.0% from 3.2%, reinforcing the notion that underlying price pressures are beginning to ease.
Following the weaker-than-anticipated Consumer Price Index (CPI) data earlier in the week, this latest PPI report strengthened market sentiment that the Federal Reserve could consider a rate cut as early as September. With inflationary pressures easing and growth showing signs of fatigue, the odds of a dovish policy pivot have increased. Lower interest rate expectations typically serve as a tailwind for gold, which tends to shine in environments where real yields are falling due to its non-interest-bearing nature.
In Europe, ECB Governing Council member Joachim Nagel struck a cautious tone in his remarks on Monday at the Frankfurt summit. He warned against prematurely signaling an end to rate cuts or committing to a pause, citing ongoing uncertainties—particularly related to geopolitical tensions in the Middle East. While inflation appears to be nearing the central bank’s target, Nagel emphasized the importance of maintaining a data-dependent, meeting-by-meeting approach.
Adding to the cautious narrative, fresh data from Eurostat showed that wages across the eurozone rose 3.4% year-over-year in Q1 2025, decelerating from the 4.1% increase in the previous quarter. This represents the slowest pace of wage growth since Q3 2022 and may offer some relief to the European Central Bank as it continues to navigate a delicate balance between softening inflation and sluggish growth.
Technical Analysis
EUR/USD once again faced selling pressure near the 1.1614 level, where bearish candlestick formations have started to emerge. The pair now appears vulnerable to a pullback toward the next support zone around 1.1495. This area is notably close to the 100- and 200-period moving averages on the 1-hour chart, currently positioned at 1.1515 and 1.1466, respectively—creating a potential magnetic zone for price action.
Additionally, the RSI has reached the 70 mark, entering overbought territory while forming a bearish divergence. This could be interpreted as a warning signal of a potential downside reversal, which may accelerate the pair’s retreat. However, if EUR/USD manages to decisively break above the 1.1614 resistance level, it could pave the way for the continuation of the prevailing bullish trend.
Trading Recommendations
Trading direction: Sell
Entry price: 1.1573
Target price: 1.1495
Stop loss: 1.1620
Validity: Jun 20, 2025 15:00:
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