The EUR/USD currency pair is trading firmly above 1.0800, buoyed by positive economic data from the Eurozone.
Eurozone Strength:
- Strong PMI: The release of robust preliminary PMI figures for May has bolstered confidence in the Eurozone’s economic outlook.
- ECB Rate Cut Likely in June: Despite the positive PMI data, expectations of a European Central Bank (ECB) rate cut at their June meeting remain high.
ECB Policy Stance:
- Mixed Signals: While some ECB officials, like Dr. Cyrus de la Rubia, see the improved PMI data as supportive of a rate cut, others, like Isabel Schnabel, advocate for caution due to persistent inflation elements.
- Uncertainty over July Rate Cut: The possibility of an additional rate cut in July remains unclear.
Technical Analysis (EUR/USD):
- Triangle Breakout and Bullish Crossover: The EUR/USD is positioned favorably after breaking out of a bullish Symmetrical Triangle pattern on the daily chart. The 20-day and 50-day EMAs have formed a bullish crossover.
- RSI Neutral: The 14-day RSI has dipped into neutral territory, suggesting a temporary pause in the upward momentum.
Possible Scenarios:
- Upside Potential: A break above the two-month high around 1.0900 could propel the EUR/USD towards 1.0950 and 1.1000.
- Downside Risk: A decline below the 200-day EMA at 1.0800 could signal a reversal.
The EUR/USD is likely to maintain its upward trajectory in the near term, supported by the positive PMI data and the prospect of an ECB rate cut in June. However, the lack of clarity regarding a July rate cut and lingering inflation concerns might introduce some volatility. Monitoring ECB pronouncements and economic data releases will be crucial for gauging the Euro’s future direction.
