- EUR/USD attempts a modest recovery from over a one-month low touched on Tuesday.
- Mixed signals from ECB policymakers might hold back bulls from placing aggressive bets.
- Diminishing odds for an early Fed rate cut underpin the USD and should cap the upside.
The EUR/USD pair ticks higher during the Asian session on Wednesday and recovers a part of the previous day's downfall to over a one-month low. Spot prices currently trade with modest intraday gains, around the 1.0880 region, though the fundamental backdrop favours bearish traders and suggests that the path of least resistance is to the downside.
The shared currency struggles to attract any buyers in the wake of mixed views on inflation and interest rates by the European Central Bank (ECB) policymakers, raising uncertainty over the timing of rate cut moves. In fact, Bundesbank President Joachim Nagel said on Monday that
it is too early for the ECB to discuss cutting interest rates as inflation remains high. In contrast, ECB Governing Council Member Tuomas Valimaki on Tuesday signalled his openness to consider lowering interest rates sooner than most of his colleagues. This, along with the underlying bullish sentiment surrounding the US Dollar (USD), validates the near-term negative outlook for the EUR/USD pair.
The USD Index (DXY), which tracks the Greenback's performance against a basket of currencies, stands tall near its highest level since December 13 and continues to draw support from reduced bets for an early rate cut by the Federal Reserve (Fed). Against the backdrop of slightly hot US consumer inflation figures last week, Fed Governor Christopher Waller said on Tuesday that the US central bank needs to be cautious and cannot rush into rate cuts as the economy remains in good shape. This remains supportive of elevated US Treasury bond yields, which, along with a softer risk tone, act as a tailwind for the safe-haven buck and contribute to capping the EUR/USD pair.
Hence, any subsequent move up might still be seen as an opportunity for bearish traders and run the risk of fizzling out rather quickly. Market participants now look to the release of the final Eurozone CPI print, which might influence the Euro. The US economic docket, meanwhile, features monthly Retail Sales and Industrial Production figures, due later during the early North American session. This, along with speeches by Fed Governors Michael Barr and Michelle Bowman, the US bond yields and the broader risk sentiment, will influence the USD and produce short-term trading opportunities around the EUR/USD pair.
Technical levels to watch
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 accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.