The Euro is currently trading near $1.076 against the US dollar, awaiting further developments, having been under pressure when attempting to consolidate above $1.08 on Friday.
FxPro senior analyst Alex Kuptsikevich noted: On last Friday, due to weak US labor market data, the Euro's growth against the dollar accelerated compared to the trend of the previous three weeks. However, efforts by the bulls to consolidate above $1.08 failed.
The Euro sellers’ actions are easy to understand, as the risk balance in the Eurozone is shifting towards a more dovish monetary policy compared to the US. European Central Bank officials are reinforcing expectations of a rate cut in June, thereby boosting market confidence that further rate cuts will follow. Friday's US labor market data narrowed this gap, as the possibility of a rate cut before September increased from 46% a week ago to 67%. Markets are used to first pricing in changes in US expectations, then spreading them to related markets.
Moreover, the market believes the Euro is attractive at its current price levels. Throughout 2023, the Euro has reversed upwards each time it approached $1.05. However, for cautious buyers, last month's dip to $1.06 seemed quite appealing.
As the Euro trades below the 200-day and 50-day moving averages against the US dollar, local technical indicators show a slight bearish bias. Furthermore, both are in a downtrend. On the other hand, the bulls have not given up on breaking through this resistance, in addition to accelerating their rise last month, they also attempted this on Friday and Monday.
Positions for both Euro and US dollar bulls and bears are very balanced, making it a good time to observe the next direction. A significant change of around 1% could signify the start of a relatively longer trend, regardless of the direction.
From a technical perspective, a break above $1.0850 for the Euro against the dollar opens up prospects for a rise to the $1.1050 area, with further upward potential. Conversely, falling below $1.0650 may force buyers to regroup in the $1.05 area, potentially triggering a further downward trend.
