- EUR/USD advanced further and approached 1.0900.
- The Greenback lost further ground amidst mixed yields.
- An ECB rate cut in June appears almost fully priced in.
The US Dollar (USD) managed to trim part of its recent decline, leaving the risk complex vulnerable while prompting another test of the 1.0890 region by EUR/USD on Tuesday.
The pair's third consecutive daily advance occurred amidst a late bounce in the Greenback and a marked rebound in US yields, against the backdrop of renewed speculation that the Federal Reserve (Fed) might maintain its restrictive stance longer than expected, a view that remained propped up by hawkish Fedspeak.
On the latter, the President of the Reserve Bank of Minneapolis, Neel Kashkari, reiterated that the Fed should wait for significant progress on inflation before reducing interest rates.
According to the CME Group’s FedWatch Tool, there is now nearly a 47% probability of lower interest rates by September, down from over 60% last week.
Regarding the European Central Bank (ECB), Board members continued to see the bank reducing rates in June, although uncertainty remains well in place regarding the potential interest rate decisions beyond the summer.
Still around the ECB, its Consumer Expectations Survey revealed a decrease in inflation expectations, reaching their lowest level since September 2021. Expectations for inflation over the next 12 months dropped to 2.9%, reaching their lowest level since September 2021. However, expectations for inflation three years out fell to 2.4%, still above the bank's 2% target.
Looking ahead, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, support the ongoing narrative of Fed-ECB policy divergence and point towards a stronger Dollar in the long run. Considering the rising probability of the ECB reducing rates before the Fed, the potential for further weakness in EUR/USD should be considered in the medium term.
EUR/USD daily chart
EUR/USD short-term technical outlook
An further comeback may see EUR/USD revisit the May high of 1.0894 (May 16), followed by the March top of 1.0981 (March 8) and the weekly peak of 1.0998 (January 11), all before hitting the key 1.1000 barrier.
On the downside, a breakdown of the 200-day SMA of 1.0787 may lead to the May low of 1.0649 (May 1), ahead of the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is passed, the pair may target the weekly low of 1.0495 (October 13, 2023), the 2023 low of 1.0448 (October 3), and the 1.0400 round milestone.
So far, the 4-hour chart suggests some resistance in the upper 1.0800s. The next up-barrier is 1.0894 ahead of 1.0942. Looking southward, the 100-SMA at 1.0820 leads, followed by 1.0766 and the 200-SMA at 1.0752. The relative strength index (RSI) decreased to about 53.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
![EUR/USD moves above 1.1150 due to improved market optimism](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/money-59004818_XtraSmall.jpg)
EUR/USD moves above 1.1150 due to improved market optimism
EUR/USD recovers its recent losses from the previous session, trading around 1.1170 during the Asian hours on Tuesday. The market optimism prevails after US Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, told Reuters that concerns about an imminent broader conflict in the region have diminished.
![GBP/USD holds position around 1.3200 ahead of UK PM Starmer’s speech](https://editorial.fxstreet.com/images/Markets/Currencies/Crosses/GBPCAD/cash-346315_XtraSmall.jpg)
GBP/USD holds position around 1.3200 ahead of UK PM Starmer’s speech
GBP/USD inches higher following the easing of the concerns about an imminent broader conflict in the Middle East have diminished following an exchange of fire between Israel and Lebanon's Hezbollah that did not escalate further.
![Gold needs acceptance above $2,530 for a fresh uptrend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/stacks-of-gold-bars-19033163_XtraSmall.jpg)
Gold needs acceptance above $2,530 for a fresh uptrend
Gold price has entered a phase of upside consolidation above $2,500, as buyers await fresh catalysts for a fresh leg higher. The focus now shifts to the mid-tier US housing and sentiment data, as the Middle East tensions seem to ease.
![Ripple price is poised for a decline as on-chain metrics show a negative trend](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/Coins/Ripple/ripple_XtraSmall.jpg)
Ripple price is poised for a decline as on-chain metrics show a negative trend
Ripple's price looks set to unwind most of its recent gains after it retested and failed to overcome resistance from the daily resistance level on Saturday and declined 4.23% in the next two days. At the time of writing, it trades slightly up 1% on Tuesday.
![Three fundamentals for the week: Focus on the fragility of the US economy](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/american-dollar-bills-on-a-stars-and-stripes-flag-28691402_XtraSmall.jpg)
Three fundamentals for the week: Focus on the fragility of the US economy Premium
US Consumer confidence data will provide a gauge of how consumers are feeling. Jobless claims are in focus after Fed Chair Powell's dovish speech. Investors will look to the core PCE index to confirm that inflation is falling.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.