Where we are: EUR/USD is trading near 1.0805, holding steady after a choppy overnight session. The pair remains below its prior NY close, consolidating within a narrow range. Key levels to watch are 1.0780 as support and 1.0830 as resistance. Overall the Euro has seen little movement since the close of EU markets.
What’s driving it: The dominant driver for the Euro remains the ECB’s mild easing bias. The central bank’s latest decision to cut rates by 25bp to 2.50% at the April meeting and retain its meeting-by-meeting language signals further easing may be on the horizon. This contrasts with a rising 10Y real yield in the US. Despite recent HICP prints remaining near the ECB’s 2% target, the services HICP near 3% keeps the doves in check, while a re-acceleration or energy spike could stay their hand.
- The ECB’s April rate cut to 2.50% and forward guidance suggests more cuts are possible.
- Eurozone HICP at 2% and Core HICP at 2.3% provide some support but remain above the ECB’s target.
- Speculative positioning in the Euro is modestly long at +40,200 contracts, leaving some room for further upside but not signalling a major squeeze risk.
NY session focus: All eyes will be on the release of the FOMC Meeting Minutes at 14:00 ET. A hawkish tilt in the minutes could trigger a dollar rally, pushing EUR/USD lower towards 1.0750. Conversely, a dovish tone could see the pair test 1.0850. The trade that’s working is shorting EUR/USD on rallies, given the ECB’s easing bias and rising US real yields. The risk is that a risk-on move fuelled by positive US data undermines the USD bid. The pain trade is a sustained break above 1.0850, squeezing Euro shorts.