Ella 
On Wednesday, the euro/dollar pair continued its recent consolidation decline from around 1.0900, a four-month high hit last week, and continued to face some selling pressure for the second consecutive day. This was also the fourth day of decline in the past five days, and pushed the euro/dollar pair to a near two-week low around 1.0840 in Asia.
The euro was weighed down by the European Central Bank’s bearish outlook for the eurozone economy and the expectation that inflation will continue to fall, thus opening the door to a rate cut in September. On the other hand, the dollar has risen to its highest level since July 11 due to rising US Treasury yields. In addition, weakening risk sentiment also favors the dollar’s relative safe-haven status and provides support for the euro/dollar.
At the same time, the market seems to believe that the Federal Reserve (Fed) will reduce borrowing costs in September and has priced in the probability of two more rate cuts before the end of the year. This will therefore weigh on US bond yields and the dollar. In addition, traders may close out their “Trump trades” due to the increasing possibility that US Vice President Kamala Harris will win the Democratic nomination. This could further limit the upside for the dollar and provide some support for the EUR/USD pair.
Ahead of this week’s key US macro data releases on Thursday, the release of the second quarter GDP preliminary figures and the US PCE price index, traders may prefer to remain on the sidelines. Meanwhile, the release of the Eurozone/US PMI preliminary figures later this Wednesday will bring short-term trading opportunities to the market. However, against the backdrop of mixed fundamentals mentioned above, investors need to be cautious before launching aggressive bearish bets on the EUR/USD pair and setting up positions for further declines.
