EUR/USD Analysis: ECB Stance and Market Expectations

The EUR/USD pair has shown strength as European Central Bank (ECB) policymakers refrain from committing to extending the rate-cut cycle beyond the June meeting. This cautious stance suggests that ECB officials are wary of aggressive policy easing, which could reignite inflationary pressures.

Market Expectations Adjust

In light of recent economic indicators signaling persistent price pressures, such as the Negotiated Wage Rates for the first quarter and the preliminary HCOB Composite Purchasing Managers Index (PMI) data for May, traders' expectations have shifted. Initially anticipating three rate cuts this year, market participants are now expecting only two.

Technical Analysis

From a technical perspective, the EUR/USD is nearing the 61.8% retracement level from the previous swing high after a pullback around the 1.0800 level. There are several resistances above, with the first significant resistance at the 1.0860 area, and a more crucial resistance at the 1.0900 level.

Our outlook suggests a potential bearish retracement towards the 1.0750 level.

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