The upcoming week will bridge two months, a period that traditionally features a high density of macroeconomic calendar events. Key data will be in focus for EUR/USD traders, including the U.S. labor market, the ISM manufacturing index, and the Eurozone inflation report. Additionally, it is essential to remember that in recent days, geopolitical issues have again taken center stage, as another spike in tension could increase demand for safe-haven assets and adjust the balance of power in the currency market.
Despite earlier agreements, the situation in the Middle East has once again escalated. Iran accused Washington of violating the ceasefire and responded with drone strikes on U.S. military sites in Kuwait and Bahrain. Tehran stated that the U.S. actions effectively ended the diplomatic process, while Donald Trump warned of intent to "finish what was started by military means."
Simultaneously, Israel continued to strike Hezbollah targets in southern Lebanon, further complicating the situation surrounding regional settlement. Additionally, tensions are high in the Strait of Hormuz. According to CENTCOM, an Iranian drone attacked a tanker carrying over two million barrels of oil in the Gulf on Saturday (after which the U.S. struck Iranian military targets). This incident renewed concerns about the safety of shipping in the region.
In other words, the geopolitical agenda is once again becoming an independent risk factor for financial markets, capable of boosting interest in safe-haven assets—primarily the dollar, which already saw heightened demand last week amid increasingly hawkish expectations for further action from the Federal Reserve. The probability of a rate hike at the September meeting has risen to nearly 50%. Overall, the market shows almost no doubt that, by the end of the year, the central bank will raise interest rates at least once by 25 basis points; the probability of this scenario is estimated at 85% (according to CME FedWatch data). If key macroeconomic reports in the U.S. published next week are strong again, this probability could significantly increase.
In particular, on Tuesday (June 30), we will learn the Conference Board's June consumer confidence index. This report will help assess how confident American consumers feel amid prolonged inflationary pressure and geopolitical tension. After a decline in May to 93.1, the market expects a local recovery to 94.2 points. Consumer optimism is critically important for the Fed: if the data exceeds expectations (especially if it crosses the 100 mark), it will indicate the resilience of domestic demand, fueling inflationary risks and strengthening the dollar.
Also on Tuesday, the U.S. will release data on job openings and labor turnover from the Bureau of Labor Statistics (JOLTS). The May report will serve as a crucial indicator of the U.S. labor market ahead of the Non-Farm Payrolls (NFP). After the unexpected April surge in job openings to 7.62 million, traders will be closely monitoring whether this trend continues or if the market cools down again. The forecast estimates put the figure at 7.28 million. For bullish dollar traders, it is essential that this indicator remains above the 7-million mark.
Another important release in the U.S. labor market will be published the following day, on Wednesday, July 1. This is the ADP report for June, which investors traditionally view as a sort of "dress rehearsal" ahead of the official U.S. labor market statistics. After a strong increase in May (122,000 jobs), the consensus forecast for June is 118,000 jobs. A stronger number could bolster confidence in the resilience of the U.S. labor market and business activity, providing additional support for the dollar.
On the same day, July 1, we will also learn the June manufacturing ISM index. This report will demonstrate whether the U.S. manufacturing sector maintains its momentum after the strong May surge to 54.0 (the best result in the last two years). Most analysts believe that in June the index will remain at approximately the same level, slightly decreasing to 53.7. Such a result will significantly support the American currency. Special attention should be paid to the report's structure, especially components such as "New Orders" (a measure of future demand) and "Prices" (the level of inflationary pressure in the sector). If both sub-indices come in green, it will further strengthen hawkish expectations regarding the Fed's future actions.
Finally, the June NFP report. Due to the Fourth of July holiday celebrations in the U.S., the publication of official labor market data will be moved to Thursday, July 2. The report will serve as the week's culmination and a key trigger for increased volatility. Following an unexpectedly robust increase of 172,000 jobs in May, analysts expect a return to more moderate growth of around 115,000 jobs in June. Investors will also be focused on the unemployment rate (expected to remain at the previous month's level of 4.3%) and hourly wage dynamics (projected to increase to 3.5%), which are direct drivers of inflation. If the main components of the report come in at or above the forecast level (not to mention in the green zone), the dollar will finish the week with strong gains.
The euro, on the other hand, will react to key inflation data from the Eurozone for June, to be released on Wednesday, July 1. This release will be a key moment for the euro this week, especially after headline inflation accelerated to 3.2% y/y in May and core inflation rose to 2.5%. The market is currently pricing in a slight slowdown in overall CPI to 3.0%. However, the core price pressure remains critically important. If the core consumer price index exceeds forecasts (i.e., comes in above 2.5%), this will force the European Central Bank to maintain a hawkish stance. Conversely, if the data shows a noticeable slowdown (especially regarding core inflation), the single currency will come under significant pressure.
From a technical perspective, the situation for the EUR/USD pair looks as follows. On the daily chart, the price is situated between the middle and lower lines of the Bollinger Bands indicator and below all lines of the Ichimoku indicator, which shows a bearish "Parade of Lines" signal. Thus, despite a considerable corrective rebound, the daily chart still prioritizes short positions. However, on the H4 timeframe, the pair closed the week between the middle and upper Bollinger Bands and between the Tenkan-sen and Kijun-sen lines of the Ichimoku indicator, warning of risks to further upside. Therefore, entering into short positions is advisable only when the price returns to the middle and lower Bollinger Bands lines and is below all Ichimoku lines on the four-hour chart (i.e., after it consolidates below the support level of 1.1370). The nearest target for the downward movement is the mark of 1.1330 (the lower Bollinger Bands line on the D1 timeframe).
