**EUR/USD Price Outlook as It Nears Critical Supply Zone**
*Original Analysis by Crispus Nyaga, sourced from The Tradable*
The EUR/USD currency pair has been showing a steady upward trend recently, with the pair climbing to a high of 1.0910 on Monday. This gain reflects a rebound from recent lows at 1.0815 seen last week, a movement that has captured the attention of traders and analysts alike. Despite thin liquidity due to the Memorial Day holiday in the United States and bank holidays across Europe, the pair’s upward momentum highlights strong interest from market participants as it approaches a significant supply zone.
This article takes an in-depth look into what is driving the current EUR/USD movement, breaks down technical signals supporting the current trend, and evaluates what traders should watch as the pair nears a critical resistance area. We will also explore macroeconomic drivers influencing price action, including interest rates and economic indicators from the US and Eurozone.
## Current Market Conditions
The macroeconomic background continues to influence the direction of EUR/USD. While global liquidity was subdued due to the bank holidays in major economies, the pair still managed to exhibit notable strength. Currency traders are focused on key economic events on the horizon and are positioning themselves in anticipation.
Some of the most relevant developments driving current movements are:
– **Thin liquidity**: Markets remained relatively quiet due to Memorial Day in the US and public holidays in Europe. Despite the reduced activity, the euro capitalized on a dip in the US dollar.
– **US Dollar softness**: The greenback weakened slightly amid expectations that the Federal Reserve may start easing rates in 2024, adding buying pressure on the euro.
– **Upcoming economic data**: Traders are poised for crucial data releases this week, particularly around inflation and job growth, which will influence central bank strategies on both sides.
## Upcoming Data Releases and Market Impact
Several high-profile data points due for release later this week are expected to have a significant impact on the market:
– **US PCE inflation data (Friday)**: Personal Consumption Expenditures (PCE) is the Federal Reserve’s preferred inflation measure. Analysts widely see this indicator as a crucial deciding factor in Fed interest rate decisions.
– **Initial jobless claims (Thursday)**: An increase or decrease in unemployment claims will provide insight into the resilience of the US job market.
– **Eurozone Consumer Price Index (CPI) (Friday)**: The European Central Bank (ECB) is closely watching price growth as it prepares for potential rate adjustments in its upcoming meeting.
Market participants are closely watching these indicators to gain further clarity on future interest rate trajectories for both the Fed and the ECB.
## Federal Reserve Policy Outlook
One of the most significant drivers of recent USD weakness is changing market expectations around Federal Reserve policy. While some members of the Fed have maintained a cautious hawkish tone, data releases in recent weeks suggest that the central bank could soon adopt a looser monetary stance.
Key insights from the Fed’s stance include:
– **Inflation relief**: April’s inflation data indicated that price pressures may be cooling, which removed some urgency for rate hikes.
– **Economic performance**: GDP growth in Q1 slowed faster than anticipated, and consumer spending is beginning to show signs of fatigue.
– **Labor market strength**: Although still tight, there is growing sentiment that the labor market could moderate, which would support the case for policy easing.
– **Rate cut probabilities**: The futures market is pricing in a greater-than-50% chance that the Fed will begin cutting interest rates by the September FOMC meeting.
Officials remain data-dependent, but the tone is shifting cautiously toward accommodation. This shift weakens the dollar and provides a tailwind for the euro.
## European Central Bank Strategy
The ECB has been more explicit in signaling its intent to lower interest rates in the near term. Governing Council officials have repeatedly suggested that the first cut might come as early as the June policy
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