Where we are: EUR/USD is currently trading at 1.1634, down -0.05% on the day. The pair has remained within a tight 1.1624-1.1645 range in European morning trading, struggling to shake off the six-week low reached last week. This level is below yesterday’s NY close, suggesting continued bearish pressure.
What’s driving it: The mild easing bias maintained by the ECB is weighing on the Euro. The market is keenly aware that softening wage trackers and services HICP near 3% provide the doves on the Governing Council with a solid base case for a follow-up rate cut in June. Lane’s interview this morning did little to dispel this perception, while Schnabel’s call for a June hike feels increasingly isolated, despite the rising prospect of at least two quarter-point increases priced in by year-end. A stronger dollar, as reflected in the DXY at 99.05, and the widening US-DE 10-year yield spread of +151bp are adding to the downward pressure on EUR/USD.
- ECB’s Lane interview reiterated the mild easing bias.
- The US-DE 10-year yield spread is widening, favoring USD.
- CFTC data shows net non-commercial Euro positioning remains modestly long (+33,513 contracts), at only 12th percentile over the past year, suggesting potential for further downside if the ECB doves solidify their case.
NY session focus: All eyes will be on the 10:00 ET release of the US CB Consumer Confidence data. A weaker-than-expected print (forecast: 91.9) could offer EUR/USD a temporary reprieve, but the broader trend remains bearish. Key levels to watch include 1.1620 as immediate support, and 1.1650 as resistance. The working trade is short EUR/USD on rallies, while the biggest risk is a surprise hawkish shift in ECB rhetoric or a sharp reversal in US yields. The pain trade here is a sudden and sustained rally above 1.1700, forcing short covering.