Dollar recovers loses against Euro

Published on 16.05.2024 11:11

The Euro dropped slightly on Thursday, falling back below 1.0880 as the Greenback broadly recovers losses from earlier in the week. The pair remains notably up for the trading week, but a late break for the US Dollar is on the cards as investors second-guess the Fed Reserve’s (Fed) stance on rate cuts and keep one foot in the safe haven USD. 

A June rate cut from the European Central Bank (ECB) is getting priced in by traders. ECB policymakers have been prodding markets cautiously in recent appearances, but ECB Governing Council member and Governor of the Latvian central bank Martins Kazaks announced Thursday that a June rate cut is definitely on the table. Markets will be keeping a close eye on next week’s Purchasing Manager’s Index (PMI) figures that are due from both the EU and the US. 

Read more: Fed officials stick to cautious tones 

Fed officials continue to dominate investor focus, with multiple policymaker from the US central bank giving soundbites on Thursday. Fed officials have broadly struck a notably cautious tone as the Fed tries to keep market hopes for Fed rate cuts to a dull simmer. At current cut, the CME’s FedWatch Tool shows rate markets are pricing in 70% odds of at least a quarter-point cut from the Fed in September, with 90% odds of two total rate cuts by the end of year. 

Several central bankers are expected to make appearances on Friday, with a speech from the ECB’s Luis de Guindos, and the Fed’s Neel Kashkari, Christopher Waller, and Mary Daly on the docket to round out the trading week. 

On the technical front, the Euro trimmed away some gains, briefly falling back below 1.0860 on Thursday, but the pair remains notably bullish in the near-term, trading well above the 200-hour Exponential Moving Average (EMA) at 1.0802. The pair is testing into its highest bids since mid-March, and is on pace to close in the green for a fourth consecutive week. 

Bullish momentum has carried EUR/USD back above the 200-day EMA at 1.0799, and the pair is up 2.5% from the last swing low into the 1.0600 handle. A technical ceiling is priced in at the March swing high of 1.0980, and bulls will have their work cut out for them if a push back to the 1.1000 handle is to be achieved.