US dollar tries to attract buyers amid expectations of Fed rate cut | 05 February 2025

EURUSD:

EUR/USD is trying to capitalize on a solid recovery this week from the 1.0200 area, the lowest level since January 13, and is range-bound near the weekly top reached earlier on Wednesday. Spot prices are currently trading around 1.0375-1.0380, almost unchanged for the day amid mixed fundamental data.

The Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday points to a slowdown in the US labor market and supports the outlook for further policy easing by the Federal Reserve (Fed). In fact, markets are pricing in the likelihood that the U.S. central bank will lower borrowing costs twice this year. Additionally, risk-on sentiment is keeping the safe-haven US Dollar (USD) near its weekly low, which in turn is a tailwind for EUR/USD.

However, traders seem reluctant to make aggressive bullish bets amid concerns that US President Donald Trump will impose tariffs on goods from the European Union. In addition, the European Central Bank's (ECB) dovish stance, which overshadowed a 2.5% rise in the Eurozone's harmonized consumer price index (HICP) in January, is undermining the euro and holding back significant gains in EUR/USD.

Traders are now eagerly awaiting the release of the final Eurozone services PMI. Meanwhile, in the US, the ADP private sector employment report and the ISM services PMI will be released. In addition, the speeches of influential FOMC members will stimulate the demand for the dollar and give new impetus to EUR/USD. However, the focus remains on the monthly US employment data, known as the Non-Farm Payrolls (NFP) report, which will be released on Friday.

Trading recommendation: Trade predominantly with Buy orders from the current price level.

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