The euro continues its rise since April | 04 June 2024

EURUSD:

The EUR/USD pair attracted buyers for the fourth consecutive day and climbed above 1.0900, the highest level since March 21, during Tuesday's Asian session. However, this rise lacks a strong continuation, causing bulls to exercise some caution before setting up for a continuation of the recent strong rebound from the round figure of 1.0600, or the low since the beginning of the year reached in April.

The US Dollar (USD) is slipping to a near two-month low amid growing recognition that the Federal Reserve (Fed) is on track to start cutting interest rates later this year, and is proving to be a key factor acting as a tailwind for EUR/USD. The US ISM PMI released on Monday pointed to a slowdown in manufacturing activity and the economy, raising the stakes for an imminent Fed rate cut in September. This sent yields on two-year US government bonds and 10-year notes down to their lowest levels since May 21, which in turn puts US dollar bulls on the defensive.

Traders, however, seem reluctant to make aggressive bullish bets on EUR/USD and prefer to wait on the sidelines ahead of Thursday's crucial European Central Bank (ECB) meeting. Investors will be scrutinizing comments from ECB officials and the latest economic forecasts in search of clues about future rate cuts amid a rise in Eurozone inflation in May. This, in turn, will play a key role in the movement of the common currency and provide fresh impetus to the currency pair ahead of the release of the US Non-Farm Payrolls (NFP) report on Friday.

Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for EUR/USD lies to the upside and any significant drop could be seen as a buying opportunity. Even from a technical perspective, a consolidation above 1.0900 could be a new boost for the bulls and confirm a positive outlook for spot prices in the near term. Traders now await Tuesday's German employment data and US macroeconomic data - JOLTS Job Openings and Factory Orders - in search of short-term opportunities.

Trading recommendation: Trade mainly with buy orders at the price level of 1.0930. We consider sell orders at the price level of 1.0875.

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