EUR/USD Analysis: ECB Rate Cuts and Fed Policy DivergenceThe EUR/USD pair is facing significant macroeconomic factors, with the European Central Bank (ECB) contemplating additional rate cuts beyond the summer, aligning with market expectations of two more rate cuts later this year.
Conversely, market participants are debating whether the Federal Reserve (Fed) will implement one or two rate cuts this year, despite the Fed's June 12 meeting indicating just one cut, likely in December.
Today's release of the EUR Core CPI Flash Estimate y/y and CPI Flash Estimate y/y shows weaker prospects than forecasted. The Consumer Price Index (CPI), which measures the change in the price of goods and services purchased by consumers, suggests that a weaker result could drive the EUR/USD pair lower.
Additionally, the recent rise in the US Dollar is partly due to hawkish comments from Fed officials and the growing monetary policy gap between the Fed and other major central banks, contributing to the euro's decline.
In the short term, the recent ECB rate cut, compared to the Fed's decision to maintain rates, has further widened the policy gap between the two central banks, potentially leading to more weakness in the EUR/USD pair.
From a technical perspective, on the Daily timeframe, we have identified a Demand Area that has not been fully tested. We anticipate a possible bearish momentum today and will look for a potential long position if the price reaches our Area of interest.
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