The euro saw a little action in early trade, as the United States markets are closed for Memorial Day. Price action is held under resistance at 1.3645, while euro-skeptic parties in the European Parliament elections gain traction. Market participants see this as a hindrance of central bank policies if such parties prevail.
“In the absence of any other information, at least today, the elections might keep the euro subdued,” said Emma Lawson, senior FX strategist at National Australia Bank Ltd. The euro-dollar has been held tight between 1.3600 and 1.3650 ahead of the European Central Bank (ECB) meeting on June 5. There is continued speculation that the ECB will act in either cutting the benchmark rate or deposit rate further, along with the possibility of asset purchases. However, the ECB has kept a tight lid on what the next step in quantitative easing will be.
The commitment of traders data, provided by the Commodity Futures Trading Commission, indicates that funds and other large speculators are increasing net-shorts on the euro against the greenback. The net-short differential increased from 2,175 contracts to 9,220 on May 20.
Price action is currently holding on the 1H chart, but the low-volume, low-event day will likely spark a pullback in EURUSD. If 1.3645 can be overtaken, as well as the 72 EMA, the pair will have the opportunity to reach 1.3660 before seeing the next level of price resistance.
Short-term support will be seen at 1.3600.