Where we are: EUR/USD is currently trading around 1.1595, testing the lower end of its recent range. Overnight, the pair traded between 1.1585 and 1.1620. This level sits slightly below Friday’s New York close near 1.1610, signaling ongoing bearish pressure. A break below 1.1580 could open the door for further declines.
What’s driving it: The dominant driver for EUR/USD remains the diverging monetary policy outlook between the ECB and the Federal Reserve, amplified by anxieties around the ongoing Middle East conflict. The ECB’s recent 25bp rate cut to 2.50% on April 17th and its mild easing bias are weighing on the Euro, especially as wage trackers soften and services HICP remains near 3%, reinforcing the case for a follow-up cut in June. This dovish stance is in contrast to a still-hawkish Fed, keeping upward pressure on the dollar. Rising mortgage costs in North America and Europe, partially attributable to the Middle East conflict, are also adding to the headwinds for Eurozone growth.
- The ECB’s explicit mild easing bias, highlighted by the meeting-by-meeting language, keeps markets primed for further rate cuts.
- Eurozone inflation, although still above the ECB’s 2% target at 3% in April, has shown signs of slowing, with both headline and core HICP figures declining in the latest print.
- Speculator positioning in the Euro is modestly long, with net non-commercial positions at +40,200 contracts, representing 4.8% of open interest. This level is only in the 13th percentile, meaning there is relatively little risk of a major squeeze.
NY session focus: All eyes will be on incoming US data releases throughout the NY session, though no specific high-impact figures are scheduled for 08:30 ET. Traders will be closely monitoring US Treasury yields and the broad dollar index for further directional cues. Key support for EUR/USD lies around 1.1550, with resistance near 1.1630. The trade that has been working is selling rallies into resistance, and that should continue until a clear shift in ECB rhetoric. The pain trade would be a surprise hawkish tilt from an ECB member, triggering a short squeeze and rapid re-pricing of ECB expectations.