In the early Asian session on Monday (June 9th), the euro rose against the US dollar, trading around 1.14. As of 11:27 Beijing time, the euro was quoted at 1.1415 against the US dollar, up 0.19%. The euro closed at 1.1394 against the US dollar in the previous trading day. Hussain Mehdi, an analyst at HSBC Asset Management, pointed out that there are significant differences in the expectations for interest rate cuts by the European Central Bank (ECB) and the Federal Reserve (Fed) in 2025.
The Federal Reserve still faces inflationary pressure due to the supply shock caused by high tariffs and the weakness of the US dollar. This will keep US yields high and intensify the volatility of the US stock market. In contrast, the proactive actions of the ECB, especially the significant shift in Germany’s fiscal policy, are expected to benefit European assets and promote structural growth. In the long term, European stock markets may unlock value due to policy support. German government bonds are an attractive option for multi-asset investors to protect their portfolios from downside risks, while the safe-haven attributes of US government bonds have been questioned.
Technical Analysis of the Euro Against the US Dollar
Resistance Levels:
The first resistance level for the euro against the US dollar may be at 1.1450 (static level).
The second resistance level is at 1.1500 (static level, integer level).
The third resistance level is at 1.1575 (the high point on April 21).
Support Levels:
The first support level is at 1.1380 (the 23.6% Fibonacci retracement level of the latest uptrend).
The second support level is at 1.1320-1.1330 (100-period simple moving average (SMA), 200-period SMA).
The third support level is at 1.1260 (the 38.2% Fibonacci retracement level).
Conclusion
The policy divergence between the ECB and the Fed has highlighted the value of European assets. While the Fed continues to grapple with inflationary pressures, the ECB’s proactive stance and Germany’s fiscal policy shifts are expected to provide a supportive environment for European assets. This divergence is reflected in the recent strength of the euro and the potential for European stock markets to unlock value in the long term. Investors may find German government bonds particularly attractive for portfolio protection, while the safe-haven status of US government bonds is increasingly being questioned.
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