EUR/USD Struggles to Find Clear Direction, Stuck in Tight Range Below Mid-1.0800s

The EUR/USD pair is trading within a narrow range, facing mixed influences from various factors.
The US Dollar weakens as the Fed projects three rate cuts in 2024, supporting the pair.
Euro bulls face pressure due to increasing expectations of a June ECB rate cut.
EUR/USD is having difficulty building momentum after bouncing from a three-week low near the 1.0800 level, remaining range-bound during the Asian trading session on Tuesday. Currently, the pair hovers around 1.0840, showing minimal daily movement and primarily responding to US Dollar (USD) market dynamics.

Despite optimism surrounding US economic growth, the USD Index (DXY), which measures the Dollar against other currencies, struggles to gain traction amid uncertainty over the Federal Reserve’s (Fed) rate-cut trajectory. While the Fed indicated last week its intention to cut interest rates by 75 basis points this year, some Fed officials expressed concerns about persistent inflation and robust US economic data. This uncertainty prevents traders from taking significant positions on the USD, leading to subdued trading in the EUR/USD pair.

On the other hand, the Euro faces pressure from expectations of an ECB rate cut in June. Bank of Italy Governor Fabio Panetta mentioned Monday that the ECB is considering lowering interest rates as inflation rapidly declines towards the 2% target. Additionally, ECB chief economist Philip Lane highlighted the possibility of reversing interest rates once there is confidence in slowing wage growth and a return to the 2% inflation target. These factors restrain the EUR/USD pair from making significant upward movements.

Traders are now awaiting the release of critical US economic data, including Durable Goods Orders, the Consumer Confidence Index, and the Richmond Manufacturing Index, which could influence demand for the safe-haven USD and provide direction to the EUR/USD pair. However, attention will remain focused on Friday’s release of the US Personal Consumption and Expenditure (PCE) Price Index, which is crucial as the Fed’s preferred inflation measure.

EUR/USD