Will the pair drop into the 14th figure range or return to the 1.1610 – 1.1670 range, in which it has traded for the past seven weeks? This is perhaps the main intrigue of the upcoming week. On Friday, the pair plummeted more than 100 pips in just a few hours, reacting to strong U.S. labor market data and heightened anti-risk sentiment. Additionally, other macroeconomic reports released in the United States supported the greenback, particularly the ISM indices, which reflected resilience in the U.S. economy and eased concerns about a slowdown in business activity in the manufacturing and services sectors.

The key macroeconomic releases and events for the upcoming week could also provoke significant volatility in the EUR/USD pair. In focus are the reports on inflation growth in the U.S. and the June meeting of the European Central Bank.

On Wednesday, June 10 (a week before the June FOMC meeting), the U.S. will release data on May Consumer Price Index (CPI) growth. This release will help to understand whether the recent surge in inflation is sustainable and to what extent rising energy prices have "leaked" into the core components of the indicator.

According to preliminary forecasts, the overall consumer price index is expected to accelerate in May to 4.2% year-over-year, its highest level in the past three years. However, an increase in overall inflation is unlikely to surprise traders, as high energy prices remain the key driver of its increase. As a result, market participants will pay special attention to the core CPI. The rise in oil prices has already led to a significant increase in gasoline and transportation costs, which, of course, gradually translates into the prices of goods and services. However, the extent of this transfer remains an open question. Most analysts expect the core CPI to accelerate to 2.9% in May (up from 2.8% the previous month). If this figure exceeds forecasts and surpasses the psychologically significant three percent mark, it will indicate that inflationary pressure extends well beyond the energy sector and is becoming more stable.

In other words, if the core CPI rises to 3.0% or exceeds that level, the dollar will again see increased demand amid heightened hawkish expectations regarding the Federal Reserve's future actions. However, if the core CPI comes in below expectations, the market will likely ignore the rise in overall inflation, attributing it to energy-related factors.

The next day (i.e., Thursday, June 11), another important inflation indicator will be released in the U.S. – the Producer Price Index (PPI) for May. Last month, the April data shocked the markets with a sharp spike: month-over-month, the Producer Price Index accelerated to 1.4%, while year-over-year, it jumped to 6.0% (the highest since December 2022). It appears that this month the PPI will again hit multi-year highs, given the dynamics of the leading indicators for May. In particular, the ISM services price sub-index surged to 71.3 (a four-year high), reflecting heightened price pressures and rising business costs. The corresponding manufacturing ISM sub-index, although it dropped by two points, remains at an extremely high level. All of this suggests that the PPI is likely to continue accelerating, increasing the risk that price pressure will spill over into overall inflation in the coming months.

According to preliminary forecasts, the overall Producer Price Index is expected to accelerate in May to 6.8% year-over-year (up from 6.0%), while the core index is expected to rise to 5.3% (after an April increase to 5.2%).

Again, if the PPI acceleration is broad and not solely focused on energy (i.e., if the core index shows a more significant increase), the EUR/USD pair will come under substantial pressure as market concerns that the PPI will support a high CPI level will intensify. Conversely, if the core index falls below 5.2%, the market's reaction will be muted, even if the overall PPI comes in "green."

In addition to the inflation reports, the results of the ECB meeting on Thursday, June 11, will also affect the dynamics of EUR/USD. Most analysts expect the central bank to raise interest rates by 25 basis points. This is the basic and most anticipated scenario, which was already priced in last week when the Eurozone inflation data was published. It was reported that the overall consumer price index rose 3.2% (the highest since November 2023), while the core CPI accelerated to 2.5% (the strongest growth rate since April of last year).

In other words, the prospect of a rate hike is unlikely to provide significant and sustainable support for the euro and, consequently, for buyers of EUR/USD. Now the intrigue lies not in whether "the rate will be raised or not," but in whether the ECB will limit itself to a single move. If Christine Lagarde indicates that the June increase is a "precautionary" one-time measure due to geopolitical factors (which are inherently temporary), the EUR/USD pair will come under pressure, despite the actual tightening of monetary policy. However, if the head of the central bank suggests it may resort to additional rate hikes in the second half of the year, the euro will strengthen across markets, including against the dollar.

However, considering the latest GDP growth data for the Eurozone, the ECB, in my opinion, will implement a "dovish rate hike." That is, it will effectively tighten policy while simultaneously conveying soft commentary. Let me remind you that on Friday, final data on Eurozone economic growth for the first quarter was published. It turned out that GDP shrank by 0.2% compared to the previous quarter (initially, a weak but nonetheless positive 0.1% growth was announced). Year-on-year economic growth was also revised downward significantly to 0.3%, down from the expected 0.8%.

Thus, based on preliminary fundamental forecasts, the EUR/USD pair retains potential for further declines. The same is indicated by the "technical" picture. On the four-hour chart, the price has confidently breached the lower Bollinger Bands line, and the Ichimoku indicator has formed a bearish "Line Break" signal. On the daily chart, the pair is at the lower Bollinger Bands line and below all Ichimoku lines. All of this indicates a priority for short positions. If sellers manage to hold below the support level of 1.1530 (the lower Bollinger Band on the D1 timeframe), the next targets for the downward movement will be the marks of 1.1500 and, in the medium term, 1.1430 (the lower Bollinger Bands line on the W1 timeframe).