The EUR/USD pair faces renewed pressure as the pair retreats from six-week highs. It fell below 1.1400 in response to Eurozone inflation data, ahead of significant US factory orders and job data. Additionally, Eurostat’s May CPI dropped below 2%, allowing the ECB to lower interest rates further. Meanwhile, weak US PMI and rising global uncertainty add to the market’s cautious tone.
Will Easing Eurozone Inflation Push ECB Further?
Recent Eurozone data showed inflation cooling faster than expected in May. After falling below 2% for the first time in eight months, the CPI remained there. Additionally, the ECB was able to modify its policy as the Core CPI dropped from 2.7% in April to 2.3%. The ECB is expected to cut interest rates again at its next meeting, according to these developments.
Although dovish expectations are growing, Lagarde is likely to reiterate that data determines policy. Traders may interpret this shift as a signal to price in further easing throughout the summer.
Following these numbers, market sentiment changed, and the EUR/USD pair became pessimistic. Although ECB President Christine Lagarde is anticipated to remain neutral, further monetary easing is made possible by lower inflation.
Can Weak Job Data Sink Dollar Recovery?
Markets now await April’s factory orders, expected to show a 3% drop following a strong March rebound. Already, Monday’s poor ISM Manufacturing PMI, which dropped to a six-month low, raised concerns about the US economy’s momentum. The US dollar might experience further declines if new orders fall short of expectations.
Trade disruptions and longer delivery times indicate supply chain strain, which makes investors more wary. Continued selling pressure on the USD would probably be supported by a soft factory orders reading.
Additionally, the focus is on the upcoming job data, which begins later today with JOLTS Job Openings. Economists predict that the number of openings will stay at 7.1 million. These announcements will influence anticipation for Friday’s crucial Nonfarm Payrolls report, which is a major determinant of changes in US monetary policy.
Despite short-term losses, the Dollar Index remains under the critical 99.00 level. Due to this weakness, Euro losses have been kept to a minimum, allowing the pair to maintain its strength in the face of wider market uncertainty. However, continued weakness in both job data and factory orders could leave the dollar vulnerable.
Key Price Levels to Watch in EUR/USD
The EUR/USD pair weakened after failing to break through key resistance between 1.1415 and 1.1435. Monday’s brief rally to 1.1450 was rejected, indicating that sellers are active at higher levels.
However, the Euro remains in a positive overall trend. The next significant resistance, which is in line with a reverse trendline, is at 1.1450. A break above this level could lead to April’s peak at 1.1545. On the downside, the pair may return to 1.1310 or even 1.1220 if the current support is not held. Technical traders are watching these zones closely for breakout signals. Additionally, momentum indicators point to consolidation in the absence of a powerful catalyst.
According to the technical outlook, the market is awaiting a clear direction. Up until then, every significant US data release was anticipated to be accompanied by volatility. Therefore, traders should keep an eye on job data and factory orders for new momentum triggers.
Can EUR/USD Regain Bullish Momentum?
The EUR/USD movement is balanced in the current context. While the dollar is still being weighed down by weak US data, the ECB has more leeway to act now that eurozone inflation has cooled. Therefore, upcoming factory orders and job data could lead to big moves in the next few trading sessions.
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