EUR/USD extends rally above 1.1600 as ceasefire sinks US Dollar

• EUR/USD gains 0.39%, trading near yearly high after the ceasefire weakens safe-haven Dollar demand.
• Powell says policy is modestly restrictive but open to cuts if inflation remains contained.
• IFO Business Climate improves for sixth month; ECB officials hint at steady path unless inflation flares.

EUR/USD extended its gains for the fourth straight day, up by 0.39%, even though it trades off the yearly highs of 1.1641, driven by US Dollar weakness spurred by a de-escalation of the Middle East conflict. Israel and Iran agreed to a ceasefire, which improved the market mood and ultimately weighed on the Greenback. At the time of writing, the pair traded at 1.1619, up 0.38%.

Market mood turned upbeat, pushing the Dollar down. The US Dollar Index (DXY), which tracks the buck's performance against a basket of six currencies, including the Euro, tumbled over 0.47%, trading near weekly lows of 97.70.

Recently, the New York Times revealed that US intelligence suggests that strikes on Iran did not destroy nuclear sites, which CNN previously reported. Despite this, Wall Street is poised to end Tuesday's session in the green with traders brushing aside hawkish comments by the Federal Reserve Chair Jerome Powell.

In his testimony before the US House of Representatives, Powell stated that rates are modestly restrictive. He added that if inflation pressures are contained, the Federal Open Market Committee (FOMC) may consider cutting rates.

During the European session, the Eurozone economic docket revealed that the IFO Business Climate rose for the sixth consecutive month, despite overall geopolitical uncertainty. Aside from this, some European Central Bank (ECB) speakers crossed the wires.

ECB Francois Villeroy said that the central bank could still cut rates if inflation expectations remain moderate, according to the FT. ECB Kazimir shifted his stance, turning neutral, favoring keeping rates unchanged. He said that he thinks "that we are at target when it comes to neutral rate."

Daily digest market movers: EUR/USD soars despite Fed's hawkish tilt

• EUR/USD increased despite Fed Chair Jerome Powell's hawkish remarks, stating that the Fed is in no hurry to cut interest rates. Fed Governor Michael Barr said that monetary policy is well-positioned for the Fed to wait and see the economic evolution.
• New York Fed President John Williams echoed Powell's comments, mentioning that tariffs could drive inflation higher and that economic growth will slow down. He also noted that tariffs are likely to impact growth and inflation in the months to come.
• Minneapolis Fed Neel Kashkari said that the Fed is in a wait-and-see mode regarding monetary policy. He says the Committee is evaluating the impact of tariffs on inflation.  Echoing some of his comments was Boston Fed Susan Collins, who said that the current state of monetary policy is necessary.
• The US docket revealed the latest US Consumer Confidence data by the Conference Board, with June's print falling to 93.0, down from 98.0 in May and well below the expected reading of 100. According to Stephanie Guichard, Senior Economist for Global Indicators at the Conference Board, "The decline was broad-based across components, with consumers' views on both current conditions and future expectations contributing to the downturn."
• Germany's IFO Business Climate Index rose to 88.4 in June, up from 87.5 in May and slightly above the forecast of 88.3. Business expectations also showed improvement, climbing to 90.7 from 88.9, beating projections of 90.0. Despite the upbeat data, the Euro saw little reaction.
• Financial market players do not expect that the ECB will reduce its Deposit Facility Rate by 25 basis points (bps) at the July monetary policy meeting.

Euro technical outlook: EUR/USD remains bullish with buyers targeting 1.1700 as next resistance

The EUR/USD remains bullish, and after hitting a new year-to-date (YTD) high of 1.1641, further upside is expected in the near term. Price action confirms the trend, while the Relative Strength Index (RSI) suggests that consolidation lies ahead.

The EUR/USD needs a daily close above 1.1650. A breach of the latter will expose the 1.1700, followed by the 1.1700 and 1.1800 figures, as the next key resistance levels. On the flipside, a daily close below 1.1600 could pave the way for testing 1.1550, followed by the 1.1500 mark. Once surpassed, the next support would be the weekly open at 1.1454.