During Tuesday's American session, the EUR/USD pair falls below the 1.0900 round-level resistance. Since the US dollar (USD) is on the rise, the major currency set is under pressure.
The United States Dollar Index (DXY), which measures the value of the US dollar relative to six major currencies, recovers sharply despite the US ISM Production PMI report being weak. This increases concerns about the country's financial development slowing down and lessens the likelihood of persistent inflation.
The production PMI, which gauges the state of factory activity, declined for the second consecutive month, according to the report. The financial data is located at 48.7, which is less than the previous reading of 49.2 and the agreement of 49.6.
Aside from that, the need outlook indicated by the New Orders Index increased to 45.4 from 49.1 previously, indicating that the economy would remain sluggish in the middle of the second quarter while the Federal Reserve (Fed) maintains its restrictive financial policy.
As the Q1 GDP development was revised downward from the initial price quotes of 1.6% to 1.3%, financial markets were concerned about the United States' finances becoming weaker.
In fact, weak US factory data has raised market expectations that the Fed will begin to reduce interest rates following the September meeting. According to the CME FedWatch tool, there is a 60% chance of a rate cut at the September conference, up from 45.8% a week ago.
However, the JOLTS Task Openings information for April was actually released by the US Bureau of Labor Statistics (BLS) at a lower rate than anticipated. According to the company, there were 8.06 million new job postings, which is less than 8.34 million that was anticipated and 8.35 million that was revised down from 8.49 million in the previous release.
In the future, investors will focus on the Nonfarm Payrolls (NFP) report for May, ADP Work Modification, and the United States ISM Solutions PMI. This range of financial data will impact market conjecture regarding September Fed rate cuts.
US dollar strengthens, EUR/USD under pressure
EUR/USD is declining as the US dollar struggles to gain ground. The European Reserve Bank's (ECB) decision on interest rates, which is expected on Thursday, will be a major event for the Euro.
Although ECB policymakers have remained confident in their decision to implement the first rate cut since 2019, investors are keen to know the interest rate outlook for the months ahead of the June meeting.
The ECB is expected by the monetary markets to reduce its key interest rate by 60 basis points (bps) this year, suggesting two rate cuts instead of at least five at the beginning of the year. However, because of a strengthening of cost pressures in Might, ongoing service inflation, and improved financial prospects, these expectations have actually decreased.
The first Eurozone Harmonized Index of Customer Rates (HICP) report from Might showed an increase in annual cost pressures that was greater than anticipated. The report also showed that the services inflation, which is primarily caused by wage growth, rose by 4.1%, marking the highest level in the previous seven months.
However, in 1Q, the Eurozone economy grew by 0.3%, outpacing the 0.2% growth predicted by price quotes.
The majority of ECB policymakers have expressed reluctance to adopt a specific rate trajectory and have instead encouraged them to remain data-dependent.
Furthermore, EUR/USD deals with a sell-off near 1.0900 in the New York City session as it moves down from 1.0900. Prior to this, the common currency set's gain reached 1.0910 thanks to strength brought about by the Balanced Triangle development's breakout in the daily time frame.
Because the 50-day Exponential Moving Typical (EMA) near 1.0800 is sloping greater, the set's near-term outlook remains stable. The 14-period Relative Strength Index (RSI) has actually fallen into the 40.00–60.00 range, indicating a slowdown in the momentum that supported the gain.
It is expected that the noteworthy currency set will continue to gain strength towards the psychological barrier of 1.1000 and the high of March 21, which is approximately 1.0940. However, it could be pressed even lower by a disadvantage relocation listed below the 200-day EMA at 1.0800.
Non-Farm payrolls
The United States Bureau of Labor Stats (BLS) releases the Nonfarm Payrolls report, which shows the range of new jobs created in the country during the previous month in all non-agricultural services.
Payroll adjustments from month to month can be incredibly erratic. Strong evaluations are also the basis for the number, which may also cause volatility on the Forex board.
Although prior months' assessments and the jobless rate are equally relevant as the headline number, a high reading is typically seen as bullish for the US dollar (USD), while a low reading is seen as bearish. Because of this, how the market reacts will depend on how it assesses all of the data presented in the BLS report taken as a whole.