EUR/USD extended earlier gains, trading near 1.1441 after bouncing off daily lows around 1.1404, following the European Central Bank’s (ECB) decision to cut interest rates by 25 basis points to 2%. The ECB’s move was widely expected but accompanied by a cautious tone, with the central bank signaling a possible pause at its July 24 meeting.
ECB President Christine Lagarde emphasized that monetary policy is “well-positioned” amid an uncertain outlook, and the easing cycle is nearing its end. The rate cut decision was not unanimous, with one dissenter likely favoring a later cut.
EUR/USD initially spiked to a daily high of 1.1498 before retreating slightly as US data and Federal Reserve (Fed) commentary influenced market sentiment. The US Dollar Index (DXY) stabilized near 98.75, reflecting cautious Fed speakers and signs of a cooling US labor market — weekly jobless claims rose and the trade deficit narrowed.
Market focus remains firmly on the upcoming US Nonfarm Payroll (NFP) report, expected to show a slowdown in job growth to 130K from 177K in April, with the unemployment rate steady at 4.2%.
Market Movers & Fed Commentary
US Jobless Claims: Increased to 247K, above estimates, reinforcing expectations for softer NFP data.
US Trade Balance: Deficit narrowed sharply by 55.5% to $61.6 billion, the lowest since September 2023.
Fed Officials:
Adriana Kugler noted inflation may rise due to tariffs but feels policy is well-positioned.
Patrick Harker stressed a “wait and see” approach amid economic uncertainty.
Jeffrey Schmid highlighted the importance of Fed credibility on inflation and noted tariffs’ future price impact.
ECB officials reportedly expect to pause rate cuts in July, with some seeing the easing cycle as nearly complete. Market players largely do not expect a further Deposit Facility Rate cut in July.
Technical Outlook:
Support: EUR/USD reclaimed the 1.1400 level but stalls below 1.1440. Key support lies at the June 2 low of 1.1344. A break below could lead to 1.13 and then to 20-day SMA near 1.1284 and 50-day SMA near 1.1218.
Resistance: Bulls need a daily close above 1.1454 to extend momentum. Beyond that, targets include the weekly peak at 1.1494, the psychological 1.1500, and April highs near 1.1572, with 1.16 as a longer-term barrier.
Momentum: RSI is flattening, suggesting that bullish momentum is pausing and buyers are taking a breather.
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