The EUR/USD currency pair remains in a consolidation phase as traders await critical US economic data that could determine its next directional move. Following the recent Federal Open Market Committee (FOMC) meeting, the US dollar found support amid hawkish repricing, but momentum has weakened as market participants shift their attention to upcoming US indicators. Currently, the market assigns roughly a 29% chance of a Federal Reserve rate hike in July, increasing to 65% by September. Analysts suggest that only strong upside surprises in economic data would prompt an earlier hike, with September favored for any policy changes due to the release of the Summary of Economic Projections and dot plot updates.
On the US inflation front, the Consumer Price Index (CPI) is expected to play a significant role in shaping market expectations. A CPI reading in line with or below forecasts could trigger a dovish repricing, weakening the dollar, while stronger inflation data would bolster the greenback. The Non-Farm Payrolls (NFP) report also remains a key event, although a lackluster reading might delay decisive market moves until CPI figures are available.
Turning to the eurozone, recent inflation data revealed a cooling trend that has eased pressure on the European Central Bank (ECB) to tighten monetary policy aggressively. Coupled with energy prices falling back to pre-conflict levels, this development supports expectations of a pause in ECB rate hikes at their upcoming July meeting. Despite some pricing indicating about a 30% chance of a July hike and approximately 27 basis points of tightening by year-end, current data and policymakers’ communications suggest a prolonged pause unless geopolitical tensions escalate.
Technically, on the daily chart, EUR/USD has pulled back into a previously broken support zone near the 1.14 level and is consolidating as it awaits US data releases. From a risk management perspective, sellers may find better opportunities near the descending trendline targeting a drop toward 1.10. Conversely, buyers will look for a breakout above current resistance to open paths toward new highs around 1.18. The four-hour chart confirms rangebound trading around 1.14 resistance, serving as an important short-term barometer; remaining below this level leans bearish while breaking above could signal bullish momentum.
In shorter timeframes like the one-hour chart, price action remains indecisive ahead of key US data. A sharp decline triggered by strong NFP figures may not see immediate follow-through until CPI data clarifies the Fed’s likely course. On the other hand, weaker than expected payrolls might extend EUR/USD’s upward retracement toward the descending trendline resistance.
Market participants should closely monitor today’s US NFP report and jobless claims figures for clues on Federal Reserve policy direction and subsequent impact on EUR/USD pricing. While uncertainty prevails in the short term, these fundamental catalysts combined with technical levels will guide investors in positioning for potential moves in the euro-dollar exchange rate over coming sessions.
