CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD weakens to 1.0775 on the firmer USD on Friday.
• The pair keeps the bearish vibe below the key EMA on the daily timeframe. 
• The key resistance level will emerge in the 1.0790–1.0800 zone; the first downside target is located at 1.0724.

The EUR/USD pair trades on a softer note near 1.0775 during the early European hours on Friday. The downtick of the major pair is supported by the renewed US Dollar (USD) demand amid hawkish comments from Federal Reserve (Fed) officials. Later on Friday, the US Michigan Consumer Sentiment Index for May will be released, which is projected to drop from 77.2 in April to 76.0 in May. 

According to the daily chart, EUR/USD has traded within a descending trend channel since mid-December 2023. The bearish outlook of the major pair remains intact, as it is below the key 100-period Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) stands in bullish territory around 55, indicating that further upside cannot be ruled out. 

The key resistance level for EUR/USD will emerge at the 1.0790–1.0800 region, portraying the 100-day EMA and the upper boundary of the descending trend channel. The next upside barrier is seen near a high of April 9 at 1.0885. The additional upside filter to watch is a high of March 21 at 1.0943, followed by March 8 at 1.0981, and finally the 1.1000 psychological level.  

On the downside, the first downside target is located near a low of May 9 at 1.0724. Extended losses for EUR/USD expose the pair to a low of May 2 at 1.0650, en route to a low of April 16 at 1.0600. A break below this level will see a drop to the lower limit of the descending trend channel at 1.0500.  

EUR/USD daily chart

• EUR/USD climbs into positive territory for the week.
• Rate cut bets increase on rising US unemployment claims.
• US consumer sentiment due on Friday.

EUR/USD gained ground on Thursday, finding upside on the week after the US Dollar (USD) broadly fell back after rising US Initial Jobless Claims sparked renewed hope of rate cuts from the Federal Reserve (Fed).

US Initial Jobless Claims rose to 231K for the week ended May 3, the highest number of new jobless benefits seekers week-on-week since last August. With possible signs of weakness appearing in the US job market, rate-hungry markets pivoted into risk appetite. 

At current cut, the CME’s FedWatch Tool shows interest rate markets are pricing in nearly 70% odds of at least a quarter-point rate cut at the Fed’s September rate call. Rate traders are also pricing in 67% chances of a second rate cut from the Fed before the end of 2024.

Fed Daly: Considerable uncertainty about inflation over the next three months

Despite broad-market hopes for Fed rate trims this year, Fedspeak continues to lean into caution. San Francisco Fed President Mary C. Daly noted on Thursday that the inflation outlook remains uncertain, and recent downturns in employment data appear to be low-risk.

EUR/USD technical outlook

EUR/USD rallied on Thursday as the pair rebounds from the 200-hour Exponential Moving Average (EMA) at 1.0740, sending the pair into the green for the week, up a quarter of a percent from Monday’s early opening bids and testing 1.0790.

Daily candlesticks warn of stiff resistance for bullish momentum as EUR/USD approaches the 200-day EMA at 1.0788, and the pair has struggled to develop meaningful momentum, grinding from the last swing low into the 1.0600 handle.

EUR/USD hourly chart

EUR/USD daily chart

• EUR/USD falls sharply to 1.0730 as the US Dollar recovers on the Fed’s hawkish interest-rate guidance.
• Fed’s Collins joins Kashkari to support keeping interest rates steady for a longer period.
• The ECB is expected to deliver three rate cuts this year.

EUR/USD extends its losing spell for the third trading session on Thursday. The major currency pair is on the back foot due to firm speculation that the European Central Bank (ECB) will start lowering its interest rates in June. A sharp decline in the Eurozone inflation has allowed ECB policymakers to consider that prospect.

Most ECB policymakers also expect that the rate-cut cycle will continue beyond June as inflation is on course to return to the desired rate of 2%, and the service inflation doesn’t seem stubborn anymore. Services inflation softened to 3.7% in April after remaining steady at 4.0% for five straight months. Traders are pricing in three rate cuts by the ECB this year.

Contrary to the majority of ECB policymakers, who broadly agree over expectations of reducing interest rates from June, one of its Governing Council members and Governor of Austria's central bank, Robert Holzmann, said in Wednesday's early New York session that he doesn't see a reason to cut key interest rates "too quickly or too strongly," Reuters reported.

Daily digest market movers: EUR/USD drops as US Dollar advances

• EUR/USD extends its correction to 1.0730 as investors turn risk-averse. The market sentiment turns downbeat as US Federal Reserve (Fed) policymakers maintain hawkish guidance on interest rates.
• On Wednesday, Boston Fed Bank President Susan Collins favored for interest rates remaining steady at their current levels until she gets greater confidence that inflation will sustainably return to the desired rate of 2%. Collins added that “A slowdown in activity will be needed to ensure that demand is better aligned with supply for inflation to return durably.” Her comments indicated that the US economic outlook is strong even though interest rates remain higher for a longer period.
• Apart from Collins, Minneapolis Fed Bank President Neel Kashkari also remained lean towards maintaining the current interest rate framework as it is for the entire year. Kashkari remains concerned over stalling progress in inflation declining to 2% amid a strong housing market. When asked about an interest rate cut, Kashkari said weakness in the job market could justify it.
• Amid dismal market sentiment, the appeal for safe-haven assets such as the US Dollar (USD) and bond yields has improved. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, moves higher to 105.70. 10-year US Treasury yields jump to 4.52%.
• This week, investors look at Fed speakers to project forward moves in the US Dollar due to the absence of top-tier US economic data. However, next week, the major trigger will be producer and consumer inflation data.. Hot inflation numbers would diminish prospects of rate cuts this year.

Technical Analysis: EUR/USD falls to near 1.0730

EUR/USD continues its losing streak for the third trading day in a row. The major currency pair drops to near the 20-day Exponential Moving Average (EMA), which trades around 1.0732, suggesting that the near-term outlook has turned uncertain.

The shared currency pair exhibits a sharp volatility contraction due to a Symmetrical Triangle formation on a daily timeframe. The upward-sloping border of the triangle pattern is plotted from October 3 low at 1.0448 and the downward-sloping border is placed from December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting indecisiveness among market participants.

• EUR/USD could lose ground due to hawkish sentiment surrounding the Fed’s policy stance.
• Fed officials indicated the likelihood of the Fed maintaining the higher rates for a longer period.
• ECB may begin reducing borrowing costs as early as June.

EUR/USD could extend its losses for the third successive session, trading around 1.0750 during the Asian session on Thursday. The US Dollar (USD) appreciates amid expectations of the Federal Reserve’s (Fed) maintaining higher interest rates. Additionally, the higher US Treasury yields support for the US Dollar (USD), undermining the EUR/USD pair.

Furthermore, hawkish commentary from Federal Reserve officials has bolstered the US Dollar. According to a Reuters report, Federal Reserve Bank of Boston President Susan Collins stated on Wednesday the necessity for a period of moderation in the US economy to attain the central bank's 2% inflation target. On Tuesday, Minneapolis Fed President Neel Kashkari mentioned that the prevailing expectation is for rates to remain unchanged for a significant period. While the probability of rate hikes is minimal, it is not entirely discounted.

On the Euro front, monthly Retail Sales surged by 0.8% in March, bouncing back from the upwardly revised 0.3% decline in February. This marked the most significant increase in retail activity since September 2022, suggesting strength in the European consumer sector. Furthermore, Retail Sales (YoY) rose by 0.7% compared to the revised 0.5% drop in February, indicating the first growth in retail since September 2022 and signaling a positive shift in consumer spending trends.

However, the European Central Bank (ECB) is anticipated to initiate a reduction in borrowing costs starting in June. Chief Economist Philip Lane of the ECB, as reported by the Business Standard, stated that recent data have reinforced his belief that inflation is gradually approaching the 2% target.

• European markets to be thin on Thursday holiday.
• Economic calendar limited on both sides of the Atlantic.
• Broader markets continue to churn on rate cut expectations.

EUR/USD is reverting to the near-term mean, stuck near 1.0750 and stuck firmly in the week’s opening trading range. European market flows are set to be thin on Thursday with German and French markets shuttered for the Ascension Day holiday, and US data is set to be strictly mid-tier until Friday’s University of Michigan Consumer Sentiment Index.

Markets will be on the lookout for speeches from European Central Bank (ECB) policymakers, but ECB officials are broadly expected to avoid rocking the boat amidst holiday-constrained market flows. US Initial Jobless Claims for the week ended May 3 is expected during Thursday’s US market session, and markets are forecasting a slight uptick to week-on-week new jobless benefits claims to 210K from the previous week’s 208K.

This week’s key data release will be Friday’s US UoM Consumer Sentiment Index, which is expected to ease to 7.0 for the month of May, down slightly from the previous print’s 77.2. The UoM’s consumer outlook survey hit a two-and-a-half year high in March as the US economy continues to outperform market hopes for easing conditions to push the Federal Reserve (Fed) towards rate cuts.

EUR/USD technical outlook

EUR/USD continues to drift towards median bids, pulling closer to the 200-hour Exponential Moving Average (EMA) at 1.0734. The pair found thin bids early Wednesday, setting an intraday high of 1.0757 before flubbing bullish momentum and ending the day near 1.0750. 

Daily candles reveal a bearish technical rejection firming up as EUR/USD gets pulled down after failing to break above the 200-day EMA at 1.0788. The pair’s near-term peak sits at 1.0813, and a continuation to the downside leaves the pair exposed to a decline to the last swing low into the 1.0600 handle.

EUR/USD hourly chart

EUR/USD daily chart

• EUR/USD comes down slightly to 1.0740 as the US Dollar rises amid a light US economic calendar.
• The ECB is expected to opt for cutting interest rates in June.
• Fed’s Kashkari sees no rate cuts this year due to the strong housing market.

EUR/USD is slightly down to 1.0740 in Wednesday’s European session. The major currency pair drops as the US Dollar rises as comments from central bank officials become the main market movers in the absence of top-tier economic data in the Eurozone and the United States. 

Investors underpinned the Euro against the US Dollar in the past few trading sessions as speculation for the Federal Reserve (Fed) pivoting to interest-rate cuts strengthened due to weak US economic data. However, the Euro struggles to hold strength amid firm expectations that the European Central Bank (ECB) will cut rates before the Fed.

Financial markets see the ECB starting to cut interest rates from the June meeting. Price pressures in the Eurozone economy are on course to return to the 2% target, and service inflation started softening after remaining steady at 4.0% for straight five months. A slew of ECB policymakers remain comfortable with interest rates coming down from June, provided there are no surprises. Also, the ECB is expected to cut interest rates three times this year, more than the Fed, which will widen the policy divergence between both central banks.

Daily digest market movers: EUR/USD edges down as US Dollar extends recovery

• EUR/USD comes under pressure as the US Dollar rebounds, recovering losses inspired by the Federal Reserve’s less hawkish guidance on interest rates than feared and weak US economic data for April. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, advances to 105.60. 
• Last week, Fed Chair Jerome Powell said after the monetary policy meeting that further policy tightening is not in the picture. His comments signalled that he continues to lean towards rate cuts this year. However, Powell acknowledged that progress in the disinflation process appears to be stalling.
• The US Nonfarm Payrolls (NFP) report for April showed that fewer jobs were added in April, and the Unemployment Rate rose to 3.9%. Average Earnings slowed more than expected, which pointed to a softening inflation outlook. The Services PMI fell below the 50.0 threshold, which separates expansion from contraction. The service sector's output fell to 49.4, missing estimates of 52.0 by a wide margin. 
• Contrary to Powell’s intent of remaining hopeful for rate cuts, Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari said on Tuesday that he sees interest rates remaining at their current levels for the entire year. Stalling progress in the disinflation process due to the strong housing market turned Kashkari hawkish on the interest rate outlook. 
• The impact of Kashkari’s hawkish guidance on interest rates on speculation for the Fed to start reducing interest rates from the September meeting is expected to remain subdued as he is a non-voting member until 2026. The CME FedWatch tool shows that there is a 65% chance for interest rates to reduce from their current levels in September. The probability of the Fed lowering rates in September has increased from the 53% recorded a week ago.

Technical Analysis: EUR/USD fails to recapture 1.0800

EUR/USD falls after failing to recapture the round-level resistance of 1.0800. The shared currency pair exhibits a sharp volatility contraction due to a Symmetrical Triangle formation on the daily time frame. The upward-sloping border of the triangle pattern is plotted from the October 3 low at 1.0448, and the downward-sloping border is placed from the December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting indecisiveness among market participants.

The asset trades above the 20-day Exponential Moving Average (EMA) near 1.0723, suggesting that the near-term outlook is bullish.

• EUR/USD continues to lose ground due to the hawkish sentiment of the Fed prolonging elevated policy rates.
• Fed’s Kashkari said that the most likely scenario is for interest rates to stay unchanged for an extended period.
• Eurozone Retail Sales marked the most significant increase in March since September 2022, indicating strength in the consumer sector.

EUR/USD extends its losses for the second successive session, trading around 1.0750 during the Asian session on Wednesday. The US Dollar (USD) gains ground due to the expectations of the Federal Reserve’s (Fed) prolonging higher interest rates. However, the softer US labor data from the last week has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024.

On Tuesday, hawkish comments from Minneapolis Fed President Neel Kashkari have bolstered the US Dollar, consequently weakening the EUR/USD pair. Kashkari said that the most probable scenario is for rates to remain unchanged for an extended period. However, if disinflation returns or a significant weakening in the job market occurs, rate cuts could be considered. While raising rates is not the most likely outcome, it cannot be entirely ruled out, as per a Reuters report.

On Monday, Bloomberg reported Richmond Fed President Thomas Barkin saying that increasing interest rates would probably limit economic growth in the United States (US). However, Barkin noted that higher interest rates would assist in curbing inflationary pressures, bringing them into closer alignment with the central bank's 2% target.

In the Eurozone, Retail Sales (MoM) surged by 0.8% in March, rebounding from the upwardly revised 0.3% decline in February. This exceeded the expected increase of 0.6%. It marked the most significant increase in retail activity since September 2022, indicating strength in the European consumer sector. Additionally, Retail Sales (YoY) increased by 0.7% compared to the revised 0.5% drop in February. This indicates the first growth in retail since September 2022, signaling a positive shift in consumer spending trends.

The European Central Bank (ECB) is expected to begin reducing borrowing costs in June. As reported by the Business Standard, Chief Economist Philip Lane of the ECB said that recent data have strengthened his belief that inflation is edging closer to the 2% target. While many ECB officials appear to support easing measures next month, President Christine Lagarde has not suggested further cuts at this point.

• EUR/USD marked by congestion in the early trading week.
• Market-driving data limited to mid-tier until Friday.
• US consumer sentiment figures lie ahead, Fedspeak to drive flows.

EUR/USD cycled familiar levels again on Tuesday, testing the waters near 1.0750 as broader markets look for signals to push in either direction. Risk appetite was crimped on Tuesday after Fedspeak from key US Federal Reserve (Fed) officials threw caution on hopes for approaching rate cuts from the Fed, but rate markets are still betting on at least two cuts in 2024, with the first cut expected in September.

European Retail Sales recovered more than expected early Tuesday, with pan-European Retail Sales growth clocking in at 0.8% MoM in March, recovering from the previous month’s -0.3% (revised up slightly from the initial print of -0.5%). Still, Euro (EUR) bidders were hobbled, and EUR/USD flubbed a bullish push for 1.0790.

Fed's Kashkari: Fed will hold rates where they are if we need to

Fed officials hit market sentiment on Tuesday, cautioning that still-high inflation and a still-tight US labor market will cut Fed rate cut hopes off at the knees if price growth doesn’t start easing and slack doesn’t start appearing in jobs figures. Minneapolis Fed President Neel Kashkari specifically highlighted that the last Nonfarm Payrolls (NFP) report, while softer than expected, was still not exactly a soft print. The Fed’s Kashkari also cautioned that the Fed may be forced to hold rates where they are for much longer than market participants expect, and refused to rule out the possibility of further rate hikes in the future if inflation progress appears to have stalled, or reverses.

German Industrial Production will be the key data print for Wednesday’s upcoming European market session. A mid-tier data release, limited market reaction will be expected. Germany’s seasonally-adjusted Industrial Production for the month of March is expected to decline, forecast to print at -0.6% compared to the previous month’s 2.1%.

Data traders looking for impactful economic releases will need to wait until Friday’s University of Michigan US Consumer Sentiment Index. The UoM Consumer Sentiment Index is expected to tick down to 76.0 in May, down slightly from the previous 77.2.

EUR/USD technical outlook

EUR/USD is trading above a recent demand zone in the near-term, holding above 1.0750 despite limited momentum. The pair is holding above the 200-hour Exponential Moving Average (EMA) at 1.0732, but a tumble back into recent congestion near the 1.0700 handle remains on the cards if bidders fumble further.

Daily candles are hardening a technical rejection from the 200-day EMA at 1.0798, and EUR/USD is at risk of an extended backslide down to the last swing low near 1.0600.

EUR/USD hourly chart

EUR/USD daily chart

• EUR/USD consolidates around 1.0770 after correcting from 1.0800 as investors expect the ECB to reduce interest rates from June.
• ECB Stournaras’s projection of three rate cuts this year is aligned with market expectations.
• The speculation for the Fed lowering interest rates from September has strengthened.

EUR/USD is slightly down by 0.10% at 1.0760 in Tuesday’s European session. The shared currency pair is broadly sideways around 1.0770 amid indecisiveness among investors due to the absence of high-tier data in the United States (US) and the Eurozone. 

The upside in the major currency pair stalled near 1.0800 as the US Dollar (USD) steadied after investors priced in weak US Nonfarm Payrolls (NFP) and ISM Services Purchasing Managers Index (PMI) data for April, which strengthened speculation for the Federal Reserve (Fed) reducing interest rates from the September meeting. The CME FedWatch tool shows that traders see a 67% chance for rates being lower than current levels in September, which has increased significantly from the 46% chance recorded a week ago.

Despite declining confidence in the US economic outlook, Fed policymakers support keeping interest rates restrictive for a longer period due to the stubborn inflation outlook. On Monday, Richmond Fed Bank President Thomas Barkin said that risks to inflation are still on the upside, and demand must be hit to finish the battle against inflation.

Recently, the Institute for Supply Management (ISM) reported significantly higher Price Paid Indexes for both Manufacturing and Services PMI. This suggests that businesses' prices paid for inputs rose significantly, which exhibits a stubborn outlook on price pressures.

Daily digest market movers: EUR/USD turns sideways after correcting from 1.0800

• EUR/USD is stuck in a tight range around 1.0770 amid the absence of tier-1 Eurozone economic data this week. Investors are expected to predict the next move in the Euro based on speculation about the European Central Bank’s (ECB) interest rate outlook. 
• Financial markets anticipate that the ECB will extend its rate-cut campaign, which is expected to start at the June meeting. ECB policymakers have projected three rate cuts this year, which are aligned with market expectations. 
• ECB policymaker and Bank of Greece Governor Yannis Stournaras said in an interview with a Greek media outlet that he sees three rate cuts this year. He sees a rate cut in July too as possible and added that the Eurozone’s economic rebound in the first quarter of the year made three cuts more likely than four.
• ECB’s confidence in beginning to reduce interest rates from June has been deepened due to consistently easing price pressures. Eurozone’s core Consumer Price Index (CPI), which is the ECB’s preferred inflation measure, has been declining consistently since July 2023. The annual core CPI has come down to 2.7% in April, suggesting that inflation is on course to return to the desired rate of 2%.
• Also, a sharp decline in Eurozone service inflation has also boosted the confidence of the ECB for cutting interest rates from the June meeting. The annual Eurozone service inflation softened to 3.7% in April after remaining steady at 4% for five months. About that, ECB policymaker Philip Lane said that April inflation data finally showed progress on services prices. However, he warned that the ECB would continue to focus on services to make sure it did not derail disinflation later on.
• Meanwhile, Eurostat reported strong Retail Sales data for March. Monthly Retail Sales rose strongly by 0.8% from the estimates of 0.6% after contracting by 0.3% in February. Annually, Retail Sales increased by 0.7% after declining 0.5% (revised from -0.7%) in February.

Technical Analysis: EUR/USD consolidates around 1.0770

EUR/USD trades in a narrow range around 1.0770. The major currency pair struggles for a direction amid an absence of top-tier economic events. The overall trend in the major is also sideways due to a Symmetrical Triangle formation on a daily timeframe. 

EUR/USD exhibits a sharp volatility contraction due to a Symmetrical Triangle formation on a daily timeframe. The upward-sloping border of the triangle pattern is plotted from October 3 low at 1.0448 and the downward-sloping border is placed from December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) shifts into the 40.00-60.00 range, suggesting indecisiveness among market participants.

The asset trades above the 20-day Exponential Moving Average (EMA) near 1.0723, suggesting that the near-term outlook is bullish.

• EUR/USD halts its winning streak due to the uptick in the US Dollar.
• ECB Chief Economist Philip Lane said that recent consumer prices have bolstered his confidence in inflation returning to the 2% goal.
• Richmond Fed President Thomas Barkin said that elevated interest rates will further assist in alleviating inflation pressures.

EUR/USD snaps its four-day winning streak, trading around 1.0760 during the Asian hours on Tuesday. However, the Euro found support from higher-than-expected Eurozone Purchasing Managers Index (PMI) data released on Monday. Later on Tuesday, Retail Sales data are set to be released during the upcoming European market session. This data will provide insights into the short-term performance of the retail sector, which contributes approximately 5% to the total value added by the Eurozone economies.

On Monday, Bloomberg report, European Central Bank (ECB) Chief Economist Philip R. Lane stated that recent Eurozone data have increased his confidence in inflation returning to the 2% goal, consequently raising the likelihood of a first interest-rate cut in June.

In an interview with Spanish newspaper El Confidencial, Lane referred to a report on consumer prices last week, which indicated that pressures in the service sector eased for the first time since November. Lane described this development as "an important initial step in the next phase of bringing inflation down."

In April, the HCOB Eurozone Services PMI saw an increase, indicating the strongest growth in nearly a year, surpassing the initial estimate. Increased demand played a significant role in the higher output, with new business volumes expanding at the fastest rate since May of the previous year.

In the United States (US), Bloomberg reported that Richmond Federal Reserve (Fed) President Thomas Barkin stated on Monday that elevated interest rates will further dampen economic growth in the United States (US) and help alleviate inflation pressures, bringing them closer to the central bank's 2% target.

Barkin also highlighted that the robust labor market provides the Federal Reserve with the chance to verify that inflation is consistently declining before contemplating reductions in borrowing costs. However, he cautioned that persistent inflation in the housing and services sectors poses a risk of maintaining elevated price increases.

The upward correction in the US Dollar (USD) exerts pressure on the EUR/USD pair. However, the softer US labor data released on Friday has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024. This has boosted investors' risk appetite, consequently undermining the Greenback against the Euro.

• EUR/USD cycled above 1.0750 on Monday.
• European Retail Sales figures due on Tuesday.
• Friday’s US consumer sentiment survey to cap off an otherwise quiet week.

EUR/USD churned around 1.0770 to kick off the new trading week, with the pair rising after better-than-expected Purchasing Managers Index (PMI) figures early Monday before settling into familiar chart territory above 1.0750 ahead of Tuesday’s pan-European Retail Sales figures due in the upcoming European market session.

Monday’s HCOB Services PMI for April surprised to the upside, printing at 53.3 MoM versus the forecast steady hold at 52.9. Tuesday’s upcoming European Retail Sales will be the day’s key data print for the day’s session, with markets expecting pan-European Retail Sales for March to rebound to 0.6% after the previous month’s -0.5% decline. 

The week’s US data docket remains tepid, leaving Fedspeak from various heads of the Federal Reserve (Fed) giving speeches this week at the forefront. The week will close out with Friday’s University of Michigan Consumer Sentiment Index, which is expected to ease back down to 77.0 in May after the previous month’s 77.2.

EUR/USD technical outlook

EUR/USD is in chart churn near 1.0770 as the pair trades within the technical range established during last Friday’s volatility, with the pair capped off in the near-term by Friday’s high just above 1.0810. Intraday momentum is leaning into the bullish side, with the pair climbing from last week’s bottom bids near 1.0650.

On daily candlesticks, the pair is trading into the high side of a descending trendline from 1.1140, a peak set in late December. EUR/USD is recovering from the last swing low into the 1.0600 handle, though immediate technical resistance is priced in at the 200-day Exponential Moving Average (EMA) at 1.0797.

EUR/USD hourly chart

EUR/USD daily chart

• EUR/USD consolidates around 1.0770 as the US Dollar steadies in the aftermath of US data.
• ECB Stournaras sees the central bank reducing interest rates three times this year.
• Weak US labor market data and poor ISM Services PMI darkens the US economic outlook.

EUR/USD strives for a direction, trading sideways around 1.0770 in Monday’s European session. The major currency pair consolidates as the Eurozone economic calendar lacks tier-1 data this week. The European Central Bank (ECB) is widely anticipated to shift to policy normalization in the June meeting. Therefore, speculation about ECB’s stance on interest rates for the second-half of the year will influence the Euro’s move.

ECB policymakers are divided over extending the interest rate-cut cycle after the June meeting. A few policymakers believe that extending rate cuts from the July meeting could revamp price pressures. For the entire year, ECB policymaker and Bank of Greece Governor Yannis Stournaras said in an interview with a Greek media outlet that he sees three rate cuts this year. He sees a rate cut in July as possible and added that the Eurozone’s economic rebound in the first quarter of the year made three cuts more likely than four. The Eurozone economy expanded by 0.3% in the January-March period, beating expectations of 0.1% gain.

Daily digest market movers: EUR/USD consolidates as US Dollar steadies

• EUR/USD exhibits a sideways move around 1.0770 as the US Dollar remains broadly steady in the aftermath of the United States labor market and the ISM Services Purchasing Managers Index (PMI) data for April released on Friday. The US Nonfarm Payrolls (NFP) report showed that fresh labor additions were significantly lower than the consensus and wage growth softened on a monthly and an annual basis. 
• Easing labor market conditions weighed on the US Dollar Index (DXY), which fell to an almost four-week low of 104.60. However, the USD index recovered quickly as the ISM Services PMI showed that businesses pay higher prices for inputs. 
• The ISM Services Prices Paid rose to 59.4 in April from 53.4, which suggested a stubborn inflation outlook. The inputs in the service sector are mainly the salaries paid to employees, which often leads to higher consumer spending and eventually prompts price pressures. Though the ISM Services PMI, which represents the service sector that accounts for two-thirds of the economy, falls below the 50.0 threshold to 49.4, the lowest reading since December 2022.
• Easing labor market conditions and weak ISM Service PMI have raised concerns over the US economic outlook. These have strengthened speculation for the Fed reducing interest rates in the September meeting. The CME FedWatch tool shows that traders see a 70% chance that interest rates will be lower than actual levels in September.
• Contrary to market expectations, Fed Governor Michelle Bowman said on Friday she would be willing to raise interest rates further if progress in declining inflation to 2% stalls or reverses Reuters reported. However, she is confident that inflation will decline even if interest rates remain where they are.

Technical Analysis: EUR/USD holds above 20-day EMA

EUR/USD extends its winning spell for the fourth trading session on Monday but is trading inside Friday’s trading range, exhibiting a sideways performance. The near-term appeal of the shared currency pair is upbeat as it is trading above the 20-day Exponential Moving Average (EMA), which trades around 1.0730.

Broadly, EUR/USD exhibits a sharp volatility contraction due to a Symmetrical Triangle formation on a daily timeframe. The upward-sloping border of the triangle pattern is plotted from October 3 low at 1.0448 and the downward-sloping border is placed from December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) shifts into the 40.00-60.00 range, suggesting indecisiveness among market participants.

• EUR/USD extends the rally to 1.0765 amid the weaker USD on Monday. 
• The US job growth slowed more than expected in April, boosting the odds of a September rate cut from Fed.
• Economists said the prospect of the ECB diverging from the Fed on rate cuts might weigh on the Euro. 

The EUR/USD pair trades in positive territory for the fourth consecutive day near 1.0765 on Monday during the early Asian trading hours. The softer US Dollar (USD) provides some support to the major pair. Traders await the HCOB Purchasing Managers’ Index (PMI) data from Germany and the Eurozone, along with the Eurozone Producer Price Index (PPI), due later in the day. 

The recent US Employment data from the US Bureau of Labor Statistics (BLS) showed on Friday that US job growth slowed more than expected in April. The Nonfarm Payrolls (NFP) came in weaker than expected, rising by 175K in April from 315K rise (revised from 303K) in March, the smallest gain since October 2023. Meanwhile, wage inflation, as measured by the change in the Average Hourly Earnings, dropped to 3.9% on a yearly basis from 4.1%. The Unemployment Rate ticked up to 3.9% in April from 3.8% in March. 

The weaker-than-expected US data boosted the odds of a September rate cut from the US central bank. Financial markets have priced in a nearly 90% chance of September rate cuts, up from 55% last week, according to the CME FedWatch tool. This, in turn, weighs on the Greenback and creates a tailwind for the EUR/USD pair.

Across the pond, the final reading of the Eurozone Services PMI is expected to remain steady at 52.9 in April, while the Composite PMI is projected to remain unchanged at 51.4. Furthermore, the Eurozone March PPI is estimated at -7.7% YoY versus -8.3% in February. 

Eurozone inflation held steady as expected in April, triggering the case for the European Central Bank (ECB) to cut interest rates in June. Economists said the prospect of the ECB diverging from the Federal Reserve (Fed) on interest rate cuts is likely to be “particularly negative” for the Eurozone and might exert some selling pressure on the Euro (EUR) against the USD.

• EUR/USD found a fresh high above 1.08 after NFP figures sparked rate cut hopes.
• US economic data came in broadly softer on Friday.
• Coming up next week: European Retail Sales, US consumer sentiment.

EUR/USD drove into a fresh weekly high on Friday, breaking above recent congestion after a broad miss in US Nonfarm Payrolls (NFP) labor and wages figures that reignited broad-market hopes for an accelerated path towards Federal Reserve (Fed) rate cuts.

US NFP comes in soft, hardens rate cut bets

US NFP net job additions in April printed at 175K, below the forecast 243K and falling away from the previous month’s 315K, which was revised upwards from 303K. Average Hourly Earnings grew by 0.2% MoM in April, below the forecast 0.3%.

ISM US Services Purchasing Managers Index (PMI) figures also declined, surprising markets that were expecting an uptick in forward-looking business operator sentiment. April’s ISM Services PMI printed at 49.4, a 16-month low, declining below the contractionary 50.0 level and missing the forecast print of 52.0 versus the previous 51.4.

A sticking point for rate cut hopes was ISM Services Prices Paid, which showed an increase to 59.2 MoM in April as business operating costs accelerate to the upside, climbing from 53.4.

Coming up next week, European Retail Sales figures are scheduled for Tuesday, and median market forecasts are expecting Euro area sales to grow 0.6% MoM in March after the previous month’s -0.5% decline. On the US side, next Friday’s print of the Michigan Consumer Sentiment Index will provide a key finger on the pulse of how deflated consumer expectations for the US economy are getting. May’s Michigan Consumer Sentiment Index is forecast to ease slightly to 77.0 from the previous month’s 77.2.

EUR/USD technical outlook

EUR/USD broke north of recent consolidation on Friday, ticking into a fresh weekly high of 1.0813, climbing out of a rough supply zone between 1.0740 and 1.0720. The week’s low is parked at 1.0650, etching in a near-term swing high as bidders try to knock the pair back into a bullish run.

Friday’s bullish push sent the EUR/USD into the 200-day Exponential Moving Average (EMA) at the 1.0800 handle, with a raft of late-week profit-taking pulling the pair back into 1.0760 as markets head off for the weekend.

EUR/USD hourly chart

EUR/USD daily chart

• EUR/USD approaches 1.0750 as the US Dollar weakens ahead of crucial US economic data.
• The ECB is widely anticipated to start reducing interest rates in June.
• The Fed sees rate cuts this year despite little progress in disinflation in the first quarter.

EUR/USD advances to 1.0740 in Friday’s European session. The major currency pair strengthens as the US Dollar (USD) is under pressure due to weak Q1 Nonfarm productivity growth and as the Federal Reserve (Fed) delivered less hawkish guidance on interest rates than feared. 

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades near a three-week low of around 105.20. Still, investors should remain cautious about EUR/USD longs as the market sentiment could turn sour depending on the outcome of two key data points:  the United States Nonfarm Payrolls (NFP) and the ISM Services Purchasing Managers Index (PMI) data for April, which are due in the New York session.

These US economic indicators will provide fresh cues about the state of the labor market and the health of the services sector, two key elements that the Fed takes into account when deciding on interest rates. Currently, traders have increased their bets in favor of the Federal Reserve (Fed) starting to reduce interest rates in the September meeting. These expectations were boosted after Federal Reserve Chair Jerome Powell sounded slightly less hawkish than expected in the latest monetary policy statement and the press conference.

Jerome Powell said that his forecast remained for inflation to fall over the course of the year, but that "my confidence in that is lower than it was." He also acknowledged that inflation “is still too high," adding that "further progress in bringing it down is not assured and the path forward is uncertain", Reuters reported. The Fed also decided to slow down the pace of the balance sheet drawdown, which is another indication that the US central bank leaned toward policy normalization by this year.

Daily digest market movers: EUR/USD rises despite firm ECB rate cut bets for June

• EUR/USD prints a fresh four-day high at 1.0740 due to a sharp decline in the US Dollar. The strength in the major currency pair could fizzle out amid uncertainty ahead of the US NFP and firm speculation that the European Central Bank (ECB) will start reducing interest rates in June.
• The US NFP data will significantly influence market expectations for the Fed’s interest-rate outlook. The consensus shows that fresh payrolls were at 243K, lower than the former reading of 303K. The Unemployment Rate is expected to steady at 3.8%. 
• Investors will also focus on the Average Hourly Earnings data, which will provide fresh clues about the inflation outlook. Monthly wage growth is forecasted to have grown steadily by 0.3%. In the same period, annual wage growth is estimated to have dipped to 4.0% from 4.1%.
• Generally, higher wage growth and strong labor demand result in robust consumer spending momentum, which eventually boosts inflationary pressures. This situation would be favorable for the US Dollar and bond yields and would likely weigh on the EUR/USD pair, as it would allow the Fed to maintain a restrictive interest rate framework for a longer period.
• Investors will also focus on the US ISM Services PMI data, a survey that gauges the performance in the services sector, which accounts for two-thirds of the economy. The Services PMI is seen improving to 52.0 from the prior reading of 51.4. Investors will also focus on subcomponents like the New Orders Index and Prices Paid Index, which will reflect the status of new business and service price inflation, respectively.
• On the Eurozone front, the European Central Bank is widely expected to reduce interest rates in June provided there isn’t any surprise with inflation as price growth in the Eurozone is on course to return to the desired rate of 2%. The expectations for the ECB achieving a “soft landing” have improved as the old continent’s economy expanded by 0.3% in the first quarter of this year, outperforming the consensus of 0.1%.

Technical Analysis: EUR/USD advances toward 1.0750

EUR/USD extends its winning spell for the third trading session on Friday and is looking to move higher to near three-week high around 1.0750. The near-term appeal of the currency pair has improved as it has broken above the 20-period Exponential Moving Average (EMA), which trades around 1.0720.

On the daily time frame, EUR/USD exhibits a sharp volatility contraction as price action has formed a Symmetrical Triangle formation. The upward-sloping border of the triangle pattern is plotted from October 3 low at 1.0448, and the downward-sloping border is placed from December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) shifts into the 40.00-60.00 range, suggesting indecisiveness among market participants.

• EUR/USD advances due to positive market sentiment ahead of US Nonfarm Payrolls on Friday.
• The weekly US Initial Jobless Claims remained at the lowest level in two months, prompting the Fed to delay rate cuts.
• ECB Chief Economist Philip Lane emphasized that the central bank will continue to adopt a data-dependent approach.

EUR/USD extends its winning streak for the third successful day on Friday, trading around 1.0730 during the Asian session on Friday. The risk-sensitive currencies like the Euro gain ground as risk appetite regains balance ahead of US Nonfarm Payrolls (NFP). US Nonfarm Payrolls is expected to print a reading of 243K for April, compared to 303K prior. Additionally, Average Hourly Earnings and ISM Services PMI will be released later on Friday. These releases are expected to offer additional insights into the condition of the United States (US) economy.

On Thursday, US Initial Jobless Claims data for the week ending April 26 showed no change from the previous week, remaining at 208K, the lowest level in two months and significantly below market expectations of 212K. This could give the Federal Reserve flexibility to delay interest rate cuts.

US Nonfarm Productivity increased by 0.3% in the first quarter, following an upwardly revised 3.5% rise in the previous quarter, but falling short of the expected increase of 0.8%. This marks the slowest pace of productivity growth since the January-March quarter in 2023.

In the Eurozone, European Central Bank (ECB) Chief Economist Philip Lane said in a virtual guest lecture at the University of Stanford that while inflation has decreased more rapidly than initially anticipated by the ECB, the transmission of policy effects lags. and the tightening impacts from previous rate hikes are still unfolding. Lane emphasized that the ECB is not committed to a specific rate trajectory and will continue to adopt a data-dependent approach.

• EUR/USD rebounds into high side of near-term range.
• US NFP labor figures to be pivotal data point this week.
• Investors looking for easing labor and slowing wages to bolster rate cut chances.

EUR/USD drove back to the top end of recent consolidation on Thursday, recovering chart territory north of the 1.0700 handle as market risk appetite regains balance heading into another US Nonfarm Payrolls (NFP) Friday.

European economic data is sparse on Friday, leaving investors to focus on US labor figures due early in the American market session. US NFP labor data is expected to show 243K net job additions in the month of April, down slightly from the previous 12-month peak of 303K. With market bets of when and how often the US Federal Reserve (Fed) will finally cut interest rates, investors are hoping for an easing in the pace of hiring to signal a downturn in the US economy which continues to chug along at a breakneck pace compared to most of the developed world.

US Average Hourly Earnings in April are also forecast to hold steady at 0.3% MoM, with wage growth a key fear point for inflationary pressures. At current cut, the rate markets are expecting a first quarter-point trim from the Fed in September, with 62% odds of at least a 25 basis point reduction according to the CME’s FedWatch Tool.

EUR/USD technical outlook

EUR/USD is back into the top side of recent consolidation, testing into the bottom end of a supply zone between 1.0750 and 1.0720. Price action has been cycling the 200-hour Exponential Moving Average (EMA) as markets await a direct driver to influence directional bias.

Daily candlesticks have baked in a pattern of lower highs and lower lows, adding weight to bearish momentum as the pair struggles to develop topside movement from the last swing low into 1.0600. EUR/USD is still trading on the bearish side of the 200-day EMA at 1.0971, and the pair is down 3.7% from the last major swing high into 1.1140 at the tail end of December.

EUR/USD hourly chart

EUR/USD daily chart

• EUR/USD trades sideways above 1.0700 as firm ECB rate cut prospects for June offset the Fed’s less-hawkish guidance.
• The ECB is expected to pivot to interest rate cuts in June as Eurozone inflation is on course to the 2% path.
• Fed Powell remains hopeful of rate cuts later this year.

EUR/USD is stuck in a tight range above the round-level support of 1.0700 in Thursday’s European session. The upside in the major currency pair remains restricted around 1.0736 this week as the European Central Bank (ECB) is expected to start lowering its key borrowing rates from the June meeting, while the Federal Reserve’s (Fed) slightly less-hawkish guidance on interest rates has supported the downside.

April’s preliminary inflation readings for the Eurozone showed that annual headline inflation grew steadily by 2.4%. In the same period, the core Consumer Price Index (CPI), which excludes volatile food and energy prices, decelerated to 2.7% from 2.9% in March. Although investors forecasted a sharper decline to 2.6%, the data signalled that Eurozone inflation is on course to return to the desired rate of 2%. Therefore, ECB policymakers remain committed to reducing its Main Refinancing Operations Rate from June. 

Meanwhile, ECB policymakers are divided about whether the central bank should extend the rate-cut cycle to policy meetings beyond June. Currently, financial markets speculate that the ECB will cut interest rates three times this year.

On the other side of the Atlantic, the US Dollar is under pressure as the Fed remains optimistic about approaching quantitative easing this year despite acknowledging that progress in reducing inflation to 2% has stalled.

Daily digest market movers: EUR/USD consolidates while US Dollar strives for firm footing

• EUR/USD consolidates in a tight range above the crucial support of 1.0700. The major currency pair fell sharply on Wednesday amid caution before the Federal Reserve’s monetary policy announcement. However, it recovered strongly after the Fed’s guidance on interest rates turned out less hawkish than feared.
• Fed’s decision to hold interest rates steady in the range of 5.25%-5.50% for the sixth time in a row was no surprise for investors but its commentary showed that it is eager to shift to a neutral stance from a hawkish one. Fed Chair Jerome Powell said in his press conference after the Federal Open Market Committee (FOMC) meeting that he still sees interest rates lower this year even though stalling progress in the disinflation process has hit his confidence.
• A sharp decline in the scale of balance sheet tapering was another indication of the central bank’s intention to pivot to quantitative easing gradually. The Fed said that starting on June 1, it will reduce the cap on Treasury securities it allows to mature and not be replaced to $25 billion from its current cap of up to $60 billion per month, Reuters reported. 
• This announcement and wording put significant pressure on the US Dollar. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, is slightly up to 105.75 but has come down significantly from a two-week high of 106.50. The volatility in the US Dollar is expected to remain high as investors await the United States Nonfarm Payrolls (NFP) and the ISM Services PMI data for April, which will be published on Friday. The US NFP is estimated to have grown by 243K, lower than the 303K job additions registered in March. The ISM agency is expected to show a rise in the Services PMI to 52.0 from 51.4 in March.

Technical Analysis: EUR/USD exhibits volatile contraction above 1.0700

EUR/USD trades inside Wednesday’s trading range. The upside in the major currency pair is capped near 1.0735 as the ECB is expected to start lowering interest rates sooner than the Fed. The near-term outlook of the shared currency pair is uncertain as the 20-day Exponential Moving Average (EMA) at 1.0720 continues to be a major barrier for Euro bulls. 

On a daily time frame, EUR/USD exhibits a sharp volatility contraction as it forms a Symmetrical Triangle pattern. The upward-sloping border of the triangle pattern is plotted from October 3 low at 1.0448 and the downward-sloping border is placed from December 28 high around 1.1140.

The 14-period Relative Strength Index (RSI) shifts into the 40.00 to 60.00 range, suggesting indecisiveness among market participants.

• EUR/USD appreciates on improved risk appetite after dovish remarks from Fed Chair Jerome Powell.
• Fed Chair Powell said that it would take longer than previously anticipated to bring inflation down to the 2% target.
• The Euro may struggle as the recent Eurozone inflation data have bolstered expectations for a potential rate cut by the ECB in June.

EUR/USD continues to gain ground on Thursday as the prevailing positive sentiment in the market provides support for risk-sensitive currencies like the Euro. This improved risk appetite could be attributed to dovish remarks from Federal Reserve Chairman Jerome Powell on Wednesday. Powell dismissed the likelihood of a further interest rate hike after the Fed decided to maintain interest rates at 5.25%-5.50% in May’s meeting held on Wednesday. The EUR/USD pair inches higher to near 1.0720 during the Asian trading session.

According to a Reuters report, Federal Reserve Chairman Jerome Powell said that progress on inflation has recently stalled, suggesting that it would take more time than previously anticipated to bring inflation down to the central bank’s 2% target. Powell also mentioned that if robust hiring persists and inflation remains stagnant, it would justify delaying rate cuts.

Traders are likely awaiting weekly Initial Jobless Claims, Nonfarm Productivity, and Factory Orders from the United States (US) on Thursday. These releases will likely provide further insights into the state of the United States (US) economy.

From the Eurozone, the Euro could struggle due to a more dovish stance from the European Central Bank compared to the US Federal Reserve. Recent inflation data showed that Eurozone inflation held steady in April, as expected. Additionally, the core inflation fell, strengthening bets for a potential interest rate cut by the ECB in June.

Thursday brings the final HCOB Manufacturing Purchasing Managers' Index (PMI) data, with market expectations aligned with the preliminary figures. This is a leading indicator gauging business activity in the Eurozone manufacturing sector.