Market Analysis

The EUR/USD pair has attracted buyers for the fourth consecutive day, pushing past the 1.0900 level, its highest since March 21, during Tuesday's Asian session. Despite this uptick, the rally has not shown strong follow-through, prompting caution among bulls. The recent rebound from the 1.0600 mark, a year-to-date low reached in April, remains a focal point for potential continuation.

The US Dollar (USD) has declined to a nearly two-month low amid growing expectations that the Federal Reserve (Fed) will begin cutting interest rates later in the year. This sentiment has bolstered the EUR/USD pair, with investors eyeing a potential Fed rate cut as early as September following Monday's US ISM PMI report, which indicated a slowdown in manufacturing activity and economic growth. Consequently, yields on US government bonds, particularly the two-year and 10-year notes, have dropped to their lowest levels since late May, keeping USD bulls on the defensive.

Despite these developments, traders are exercising caution and waiting on the sidelines ahead of Thursday's pivotal European Central Bank (ECB) meeting. Market participants will closely monitor ECB officials' comments and the latest economic projections, particularly in light of rising Eurozone inflation in May, to gauge future rate cut possibilities. This event will likely dictate the direction of the euro and provide fresh momentum for the EUR/USD pair ahead of Friday's US Nonfarm Payrolls (NFP) report.

Overall, the prevailing fundamental backdrop suggests that the path of least resistance for the EUR/USD pair remains to the upside. Any significant pullback could be viewed as a buying opportunity. Technically, a sustained move above the 1.0900 level would likely reinforce bullish sentiment and validate a positive short-term outlook. Traders are now focusing on Tuesday's release of German employment data and US macroeconomic indicators such as JOLTS Job Openings and Factory Orders for potential trading opportunities in the near term.

EURUSD

Paraphrasing text from "FX Street" all rights reserved by the original author.