The EUR/USD pair experienced a slight slump on Thursday, dropping below 1.0880 as the US Dollar regained strength after a period of losses earlier in the week. Despite this setback, the pair is still up for the trading week. Investor focus has shifted towards the Federal Reserve’s stance on rate cuts, leading to uncertainty and a preference for the safe haven USD.
Traders have begun pricing in a potential rate cut by the European Central Bank (ECB) in June. ECB policymakers have been hinting at this possibility in recent appearances, with ECB Governing Council member Martins Kazaks confirming that a rate cut is on the table. The upcoming Purchasing Manager’s Index (PMI) figures for both the EU and the US will be closely watched by the markets in the coming week.
Meanwhile, Fed officials have maintained a cautious tone as they address market expectations for rate cuts. The CME’s FedWatch Tool currently shows a 70% probability of a quarter-point rate cut by September, with a 90% chance of two total rate cuts by the end of the year. Market sentiment continues to be influenced by these policy decisions and statements from central bankers.
On the technical side, EUR/USD briefly dipped below 1.0860 but remains bullish in the near-term, trading above the 200-hour Exponential Moving Average (EMA) at 1.0802. The pair is testing its highest levels since mid-March and is set to end the week in positive territory for the fourth consecutive week. However, a key resistance level lies at 1.0980, and bulls will need to overcome this hurdle to push the pair towards the 1.1000 mark.
In the upcoming trading sessions, market participants will be closely monitoring speeches from ECB’s Luis de Guindos and Fed officials Neel Kashkari, Christopher Waller, and Mary Daly. Their remarks could provide further clarity on the central banks’ monetary policy stance and potential rate cuts. As the focus shifts towards next week’s PMI figures, investors will be looking for additional indicators on the health of the economies in the EU and the US.
