The EUR/USD pair remains under pressure after its recent decline toward the 1.1500 area. The main driver is the strengthening of the US dollar amid resilient macroeconomic data from the United States.
Recent employment data exceeded market expectations, increasing the likelihood that the Federal Reserve will maintain a hawkish stance and supporting higher US Treasury yields.
Markets await signals from the ecb and us inflation data
Additional pressure on the euro comes from investor caution ahead of upcoming US inflation data and the European Central Bank meeting. Despite expectations of relatively hawkish commentary from the ECB, market participants continue to favor the dollar as the higher-yielding currency. The interest rate differential between the Fed and the ECB remains in favor of the US dollar, limiting the euro’s recovery potential.
Technical outlook remains moderately negative
After retreating from May highs, EUR/USD is trading near the 1.1540–1.1550 range. Over the past month, the pair has declined by more than 2%, reflecting a shift in sentiment in favor of the dollar. Immediate resistance is located in the 1.1550–1.1560 zone, while continued pressure may lead to another test of the 1.1500 area. Short-term price action will largely depend on ECB rhetoric and further signals regarding US monetary policy.
Near-term outlook
In the short term, the balance of risks remains tilted toward further EUR/USD downside. Strong US data and expectations of higher Fed rates continue to support the dollar. A sustained euro recovery would require either a softening in US rate expectations or more hawkish signals from the ECB than currently priced in by the market.
Failure to break above 1.1550–1.1560 suggests increased risk of at least a retest of 1.1500. A move above 1.1560 would open the path toward 1.1580–1.1600, where the euro may again face selling pressure. As previously noted in Euro under pressure as strong U.S. data boosts dollar, the ECB’s interest rate decision could significantly impact the pair’s dynamics.
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