- Moody’s plans to lower US debt ratings, likely leading to a decline in the US dollar and a rise in EUR/USD.
- Even with limited economic data, speeches from the ECB and Fed influence market sentiments toward the euro.
- Traders are on the lookout for new insights amid financial uncertainty, along with discussions about unemployment.
EUR/USD increased for the third consecutive day on Wednesday as the US dollar (USD) faced challenges after last Friday. This has put pressure on traders, especially with Trump pushing for “one big beautiful bill.”
The euro is taking advantage of the US dollar’s broader weakness. Moody’s decision to downgrade the US government’s debt rating from AAA to AA1 over the weekend raised investor concerns, while the Trump administration’s budget prepares for voting in US Congress.
With economic data scant for both the Eurozone (EU) and the US, traders are paying close attention to speeches from the European Central Bank (ECB) and Fed officials. Additionally, US trade discussions and geopolitical factors are influencing EUR/USD’s movement.
Recently, ECB member Jose Luis Escriva expressed gratitude, noting the unexpected support for the euro but mentioned that predicting tariff impacts on inflation could become more complex.
On Thursday, the Economic Schedule will present the HCOB Purchase Manager Index (PMI) data for May in the EU, Germany, and France. Meanwhile, the US economic docket will include early unemployment claims data and S&P Global PMI estimates.
EUR/USD Daily Market Movers: USD’s decline as the market reacts to US policies
- US House Majority Leader Scalise announced that the House will vote on Trump’s tax bill late Wednesday. Trump has voiced confidence in the bill’s progress in Congress.
- Trump has confirmed that ceasefire negotiations between Russia and Ukraine will commence, taking place in Vatican City.
- A ceasefire between Russia and Ukraine would benefit both nations and ease supply chain disruptions across Europe.
- The probability of an interest rate cut by the ECB stands at 58% for the June 5 meeting, with most ECB officials supporting the cut followed by a pause.
- EU HCOB PMI data is expected to show slight improvements in manufacturing PMI, but not in services or composites. This reflects the ongoing global economic slowdown despite remaining in expansion territory.
- German Prime Minister Merz confirmed his meeting with President Trump and discussed potential tariff exclusions, expressing optimism about a possible trade deal between the US and the EU, hinting at a thaw in transatlantic trade tensions.
EUR/USD Technical Outlook: Positioned to test 1.1400
EUR/USD remains on an upward trend. The pair has surpassed the 20-day Simple Moving Average (SMA) at 1.1277 and is approaching a two-week high of 1.1362, exceeding the 1.1300 level.
The relative strength index (RSI) suggests momentum is on the side of buyers.
Consequently, the pair is looking at 1.1400 as the next resistance point. Breaking through this level could lead to challenges at the peak from April 29 at 1.1421, and then 1.1473 and 1.15 from April 11.
On the downside, sellers need to push prices below 1.1300 to test the lowest value from May 20 at 1.1217, with further levels at 1.12 and the 50-day SMA at 1.1130.
