Forex market overview – June

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Hawkish speech of Mario Draghi and euro rally, sterling breaking $1.30 for the second time in two months and weak US dollar performance coupled with low NFP numbers marked the month of June in the forex market. Let’s take a closer look at what happened.

EURO

There has been a massive confusion in the global market regarding the recent performance of the Euro. Euro has shown strong performance since the beginning of the year, as pro-European forces have remained dominant in the continent where right-wing politicians are gaining more and more popularity. The ECB President Mario Draghi made a hawkish speech at the last ECB press conference clearly pointing out that the EU economy is doing well, and that the ECB’s bond buying program may be stopped soon. The minimum bid rate remained 0.00%. The market reacted optimistically, and traders have already established long positions on the European currency, with analysts expecting a bullish run for the euro to persist in the month of July.

The euro has reached its highest point against the US dollar since June 2016, closing the month at $1.1420. There is still heavy resistance at the $1.15 level, and breaking this level could see the European currency hitting $1.20. Failure to break the 1.15 mark could send the euro lower to 1.1120, its June low.

Great Britain Pound

The British pound has almost hit its highest level against the US dollar since the Brexit last year – trading almost at the same level as its May high of $1.3050. The recent growth in the UK GDP fulfilled the market expectation of 2.0% and it clearly exhibits a strong sign of recovery in the British economy. The sterling made strong gains against most of its major rivals after Bank of England Governor Mark Carney hinted that adjustment in monetary stimulus may bring stability in the British economy.

The British pound closed the month above the $1.30 mark, but will likely find resistance at the May high of $1.3050. A break of this level could push the sterling higher to $1.3450, its high of September 2016, while a failure to do so could see the pound find support at $1.28. The trend since the beginning of 2017 is definitely upward.

US Dollar

The recent performance of the U.S economy is not up to the expectations despite two rate hikes by the Federal Reserve, and the Fed chair Janet Yellen has given a slight indication regarding no more rate hikes for this year. The non-farm payrolls reported at the beginning of June showed a less-than-expected increase of 138K new payrolls – significantly lower than the expected 181K. The unemployment rate in the United States fell to 4.3%. Inflation numbers were down compared to their last month’s figures, with the CPI actually falling into negative territory. The reported CPI of -0.1% shows that despite record low unemployment rate, the Fed is still fighting to reach the targeted CPI rate of around 2%.

The quarter-over-quarter GDP rose to 1.4% vs. 1.2% expected, creating a mixed sentiment prior to the closing of the month of June. The US dollar is trading in a range between 1.05 and 1.15 against the euro since January 2015, and closed the month of June close to its upper band of 1.15.

The US dollar index exhibited a strong decline in the second half of June. As we said for the euro, the euro-bullish market sentiment may send the US dollar significantly lower in the coming period, reaching as low as $1.20 per euro in case the euro bulls remain optimistic about the European currency.

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A self-taught trader, Kar Yong was once featured in Channel News Asia’s Money Mind Young Investor. He was also featured as a Social Guru on the eToro social trading platform where he led the path for more than a thousand traders in confusing market conditions by sharing his trading strategies through forums and blog posts. Today, he teaches his proprietary 4 Pillar Forex Trading Strategy to students from all over the world.

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