EUR/USD has given back the gains from last Thursday's mixed US jobs report and is consolidating near the 1.14 support. Traders are now looking past this week's light calendar toward the US CPI print, which is set to be the more important release for the pair.
EUR/USD spiked higher after the mixed US NFP report last Thursday, but the pair failed to extend the move and has since erased those gains. Price is now consolidating near the key 1.14 support on the daily chart.
Dollar softens as rate-hike odds slip
The US dollar came under pressure late last week after the jobs data triggered a slightly dovish repricing in interest rate expectations. The chance of a July hike now stands at just 24%, while the odds of a September move dropped to 55%.
Given the Fed's focus on inflation, the US CPI will likely carry more weight. Until that release, the dollar may stay rangebound. Fed's Waller speaks today, but unless he explicitly endorses rate hikes, price action should hold its range, with the FOMC meeting minutes on Wednesday the other potential catalyst.
Easing data seals an ECB pause
On the euro side, recent inflation data showed a welcome easing for the ECB, which, together with the drop in energy prices to pre-war levels, has diminished the urgency for further tightening. Policymakers have signalled as much in recent speeches, effectively sealing a July pause.
The market still prices in a 27% chance of an ECB hike in July, a figure the author says should now stand much lower. A total of 25 bps of tightening remains priced in by year-end, which suggests traders expect at least one more move.
Levels to watch
On the daily chart, sellers eyeing the downward trendline could position for a drop toward the 1.10 handle. A break higher would instead open the door to a rally into the 1.18 handle. For now, the data supports a prolonged pause and price remains pinned to 1.14.
Source: investingLive
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