EUR/USD Edged Higher Amid Weak Demand For Usd, But Still Faces Resistance At 1.0900

EUR/USD continued to move higher in Asia on Wednesday after rebounding from the 1.0860-1.0855 area overnight, with the US dollar price trend sluggish. EUR/USD is now trading just below the 1.0900 mark, near the highest level since March 21 hit on Tuesday.

Newly released US macro data was weak, showing signs of a cooling economy and solidifying bets that the Federal Reserve (Fed) will cut interest rates later this year. Such expectations have pushed down US Treasury yields and weighed on the dollar, thus boosting EUR/USD. However, the upside for EUR/USD seems limited as traders may prefer to remain on the sidelines ahead of the European Central Bank (ECB)’s key monetary policy meeting on Thursday.

As policymakers have generally signaled in recent weeks, the ECB is more likely to cut interest rates by 25 basis points at the end of its meeting on June 6. This would be the first time the ECB has started to cut interest rates since March 2016, and it will release updated economic forecasts. This, along with a speech by European Central Bank President Christine Lagarde, will be closely watched for clues on future rate cuts after eurozone inflation rose in May. This will therefore play a key role in boosting EUR/USD.

The focus will then shift to the blockbuster US monthly employment data, commonly known as the Non-Farm Payrolls (NFP) report, due on Friday. The crucial US employment data could influence the market’s outlook on the Fed’s next policy move and the dollar’s trend. Ahead of this key central bank event and US macro data risks, Wednesday’s US economic data, including the US ADP employment change and the ISM services purchasing managers’ index, could bring short-term trading opportunities to the EUR/USD pair.

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