- EUR/USD gapped lower and tested five-week lows near 1.0730.
- The US Dollar picked up strong pace and advanced to multi-week tops.
- Political uncertainty in Europe resurged after Parliamentary elections.
On Monday, the US Dollar (USD) maintained its post-NFP uptrend well and sound, prompting EUR/USD to extend its downward momentum to five-week lows in the 1.0735–1.0730 band.
The firm price action in the Greenback, however, could not avoid part of the risk complex to regain some balance after Friday’s sharp losses and was exclusively derived from weakness in the European currency in response to results from parliamentary elections in the old continent and the call for snap elections by French President E. Macron to be held on June 30.
Monday, in the meantime, saw some ECB board members, including board member P. Kazimir, J. Nagel, and President C. Lagarde, urging caution in considering further interest rate cuts due to uncontrolled inflation and potential price pressures. They compared the bank's interest rate trajectory to a mountain ridge, suggesting policymakers may wait multiple meetings before implementing further cuts.
Regarding the Federal Reserve (Fed), the latest Nonfarm Payrolls numbers in May (+272K) hurt bets on anticipated interest rate hikes and now suggest the likelihood of such a move in November or December.
The CME Group's FedWatch Tool now suggests a nearly 65% probability of lower interest rates by the November 7 meeting and around 49% in September.
In the short term, the ECB's recent rate cut widened the policy gap with the Fed, potentially exposing the EUR/USD to further weakness. However, in the longer term, the emerging economic recovery in the Eurozone, coupled with perceived slowdowns in the US economy, should mitigate this disparity, offering support to the pair.
Looking ahead, the next big events for the pair will be the release of US inflation figures tracked by the CPI and the FOMC meeting, both due on June 12.
EUR/USD daily chart
EUR/USD short-term technical outlook
If the bearish tone persists, EUR/USD may initially target the June low of 1.0732 (June 10), before the May low of 1.0649 (May 1), and the 2024 bottom of 1.0601 (April 16).
If bulls regain some composure, spot may test the June high of 1.0916 (June 4), seconded by the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before reaching the important 1.1000 level.
So far, the 4-hour chart indicates some signs of life following the recent sharp drop. That said, the next hurdle is the 200-SMA (1.0802), ahead of the 55-SMA of 1.0846. On the flip side, 1.0732 comes first prior to 1.0723 and 1.0.649. The relative strength index (RSI) bounced to around 30.
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 holds gains below 1.1350 amid US Dollar weakness
EUR/USD is consolidating gains below 1.1350 in Wednesday's European trading on the back of a sustained weakness n the US Dollar. Renewed trade jitters, along with fresh concerns about the US fiscal health, add further pressure on the Greenback. The focus now is on the ECB and Fed-speak.
GBP/USD defends gains below 1.3450 after strong UK inflation data
GBP/USD is off the highs but defends gains below 1.3450 in the European session on Wednesday. The data from the UK showed that the annual CPI inflation jumped to 3.5% in April from 2.6% in March, temporarily lifting the Pound Sterling. But a softer risk tone caps the pair's upside.
Gold edges higher reclaiming $3,300 on rising geopolitical tensions and US fiscal woes
Gold breaks higher on Wednesday towards $3,308 at the time of writing, fueled by concerns that tensions in the Middle East might spiral out of control again and US fiscal woes. In late trading on Tuesday, CNN reported that Israel is considering targeting nuclear sites in Iran.
Dogecoin and Shiba Inu Price Forecast: DOGE and SHIB show early signs of a bullish breakout
Dogecoin and Shiba Inu show early signs of a potential rally as both meme coins stabilize at key support levels. On-chain metrics for dog-themed meme coins show positive funding rates and dormant activity, reinforcing bullish sentiment. The technical outlook also supports the case for double-digit gains.
FOMO vs fundamentals: Retail buys the dip, institutional investors stay cautious
Retail optimism is rising, but institutions are still treading carefully amid lingering macro and earnings risks. Policy and fiscal uncertainty remain elevated, with trade tensions, U.S. debt concerns, and a cautious Fed dominating the backdrop.
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.