Global financial markets faced low trading volumes on Monday, largely due to holidays in the US and UK. The EUR/USD forecast pair is showing signs of upward movement, with buyers maintaining control. This follows Friday’s data indicating a slight easing in US inflation expectations, which improved market sentiment. By the mid-European session, EUR/USD dropped from an intraday high of 1.0866 but stayed in familiar territory, reflecting cautious optimism in the market.
Eurozone News Impacting the EUR/USD
The Eurozone’s economic outlook remains mixed, particularly with disappointing data from Germany. The IFO Business Climate Index in May stayed at 89.3, identical to April’s downward revision. Germany’s current business assessment worsened to 88.3, while expectations showed a marginal improvement to 90.4 from 89.7. Despite these numbers, the market is still digesting the broader implications of economic shifts within the region.
ECB’s Monetary Policy Stance
European Central Bank (ECB) officials have played a significant role in influencing market sentiment. ECB’s chief economist, Philip Lane, indicated that the central bank is prepared to lower interest rates in June. However, he also stressed the need for restrictive monetary policies to counter wage growth, which may not normalize until 2026.
Additionally, Olli Rehn, the Governor of the Bank of Finland, shared insights regarding the ECB’s rate plans. He suggested that inflation is moving steadily towards the ECB’s 2% target. While a rate cut is expected in June, future moves, including potential changes in July, remain uncertain and depend on continued disinflation and geopolitical factors.
US Market Absence on Memorial Day
With US markets closed for Memorial Day, no significant economic releases were expected from the US, resulting in thinner-than-usual trading conditions. This contributed to a less volatile day for the EUR/USD forecast pair.
EUR/USD Short-Term Technical Overview
In the short term, EUR/USD remains on a modest upward trajectory. Technical indicators on the daily chart point upwards, but their strength is diminishing. The pair is trading above all its moving averages, with significant buying interest clustered around the flat 100 Simple Moving Average (SMA) near 1.0815.
The 20 SMA is showing upward momentum, while the 200 SMA remains flat. On the 4-hour chart, the pair is still showing increased buying interest as technical indicators rise above their midlines. While the trend remains positive, a strong breakout is unlikely due to the absence of US market participants.
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