EUR/USD Edges Higher Amidst Softer Dollar and Positive Market Sentiment
In the early Asian trading hours on Monday, the EUR/USD pair sees a modest uptick, buoyed by a weakening US Dollar and a prevailing risk-on mood. The trading day is expected to be influenced primarily by market sentiment, as US economic announcements are on pause due to the Martin Luther King Jr. holiday.
The EUR/USD is trading slightly higher, at around 1.0953, marking a 0.03% increase.
European Central Bank (ECB) officials have underscored the importance of waiting for more economic indicators before proceeding with interest rate policy adjustments. ECB Chief Economist Philip Lane indicated on Saturday the importance of upcoming data in June to inform potential rate reductions, cautioning against premature actions.
Additionally, ECB President Christine Lagarde recently noted that the peak of inflation pressures may be behind, with rate cuts on the horizon should inflation consistently trend below the 2% target.
In the US, an unexpected dip in the Producer Price Index (PPI) for December has prompted speculation about the Federal Reserve’s rate cut initiatives in the upcoming year. December’s PPI report showed a year-over-year increase of 1.0%, a deceleration from November, with the core PPI remaining unchanged monthly, pointing to a yearly rise of 1.8%.
This data has led investors to anticipate a more dovish monetary stance from the Fed, with predictions of up to 160 basis points in rate cuts for the year.
The market will also closely monitor speeches from various ECB officials throughout the week, including remarks from Villeroy, Nagel, and several appearances by President Lagarde, along with the release of the ECB Meeting Minutes.
EUR/USD Technical Analysis:
EUR/USD’s technical posture remains neutral as the pair oscillates between the immediate support level at 1.0960 and resistance at 1.0995. A decisive breach of either threshold is required to provide clear directional clarity.
A downward breach of support could trigger a continuation of bearish momentum, targeting the 1.0860 level as a precursor to a potential head and shoulders pattern, which could further depress prices to 1.0765 and subsequently 1.0645. Conversely, piercing the resistance level could reignite the short-term bullish trend, propelling the pair towards an initial test of the 1.1080 region.
Today’s expected trading range is between the 1.0870 support and the 1.1050 resistance, with the trend projected to remain neutral for the duration of the day.
EUR/USD Live Chart
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