EURUSD: Euro Affected by a More Aggressive Fed
Investors anticipate a more hawkish Fed policy compared to the ECB, which significantly impacts the EUR/USD. The euro has rebounded nearly 5% from April lows, reaching levels near $1.12, a level not seen since July last year. This rise reflects the expectation that the ECB will maintain a moderate stance, with a 25 basis point cut at the next meeting and possible additional cuts through the end of the year.
In the US, the Fed faces more uncertainty, with the market considering a possible 50 basis point cut. Although the dollar remains strong, market reaction is less intense compared to the euro, as net positions on dollar futures are significantly smaller. This divergence in expectations and positions indicates that investors are favoring the euro against the dollar in the short term.
The recent momentum that took EUR/USD to its highs of the year at 1.12011 has lost strength, finding support at 1.10258. Although the Asian session showed a bullish opening, weakness persists. This week will be key with the release of relevant economic data from the Eurozone and the US, such as the trade balance, vehicle sales, debt auctions and crude oil stocks, as well as the Fed's Red Book, which could influence the pair's direction. The RSI is in the mid-zone, while the checkpoint (POC) around 1.08554 suggests a potential near-term correction of the euro towards its mid-trading zone if the US market shows good data versus the euro zone, contrary to the investor stance.
Ion Jauregui ActivTrades Analyst
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