Where we are: EUR/USD currently trades at 1.1756, up +0.53% on the day. The pair has traded in a range of 1.1692-1.1797 so far, pushing towards the upper end of the range. This price action suggests a continuation of the bid seen in the EU session, and marks a substantial move above yesterday’s NY close.
What’s driving it: The Euro is gaining ground as the market continues to digest the ECB’s mild easing bias. This dovish outlook, reinforced by Piero Cipollone’s comments on the economic implications of the new energy shock, and the latest ECB wage tracker indicating stable negotiated wage pressures, are weighing on the single currency. German yields are lower across the curve, with the 2-year Schatz down 8bp to 2.566% and the 10-year Bund down 4bp to 2.996%, further eroding the Euro’s appeal. A weaker dollar, as reflected in the DXY at 97.79 (-0.41%), is providing additional tailwind.
- ECB’s Cipollone’s comments on the energy shock are tilting the balance toward further easing.
- The latest ECB wage tracker is offering doves further ammo ahead of the June meeting.
- CFTC data shows a net non-commercial Euro position at +35,712 contracts, in the 10th percentile, indicating potential for a short squeeze if the narrative shifts bullishly.
NY session focus: The market will be watching the 08:15 ET release of the ADP Non-Farm Employment Change. A stronger-than-expected print could temper the Euro’s advance, while a weaker number would likely fuel further gains. Key levels to watch are 1.1800 as immediate resistance and 1.1700 as initial support. The current trade is long EUR/USD, riding the ECB dovish narrative and USD weakness. The risk is a hawkish surprise from the Fed or a re-acceleration in Eurozone services inflation. The pain trade would be a return of USD strength, triggered by strong US data, sending EUR/USD back below 1.1650.