Forex Analysis & Reviews: 28.05.2024 - Investors bet on the euro's...

InstaForex Loprais Team - Official participant of the Dakar rally

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex Loprais Team - Official participant of the Dakar rally

28.05.2024 12:23 AM

Investors bet on the euro's strength. Overview of EUR/USD

The European Central Bank will hold its monetary policy meeting on Thursday, June 6. Traders are highly confident that the ECB will lower its benchmark deposit rate by 25 basis points, mainly because members of the Governing Council have repeatedly indicated this step.

The main source of optimism that drives the euro higher is that, by several indicators, the manufacturing sector in the Eurozone has started to steadily recover. The balance of orders and inventories reached a 2-year high in May. Labor market tensions are increasing, with employment rising by 0.3% in the first quarter, indicating that the economy continues to create new jobs.

The Eurozone inflation outlook is mixed. The services sector contributed approximately 3.7% year-on-year, and the downward trend is weak, while non-energy industrial goods are growing by only 0.9% y/y. Domestic inflation, meaning non-exportable inflation, is still too high at 4.3%. Its decline appears to be stable, but the pace is slow.

During the March and April ECB meetings, ECB President Christine Lagarde emphasized that by June they would know "much more." Since then the key indicators have shown that activity has unexpectedly increased in April, which continued into May, and a smaller-than-expected decline in inflation. There is a risk that inflation will decrease more slowly than forecasts suggest, meaning the ECB may not cut rates as aggressively as the markets currently expect. If these concerns materialize, the trajectory of rate cuts will become less steep, generally supporting the euro due to the retention of higher yields.

For instance, wage growth was 4.7% in the first quarter, 0.2% higher than the previous quarter. Although the ECB has highlighted that this growth is largely due to base effects, and faster indicators point to a decrease in wages, the risk of the ECB refraining from rate cuts cannot be ignored. Perhaps this is what the markets are considering when they buy the euro.

The market has already fully priced in the potential rate cut, so the results of the ECB meeting are unlikely to trigger a euro sell-off. Markets assume that the Eurozone's economic recovery pace exceeds forecasts, so the risks are generally towards a slower rate cut trajectory rather than a faster one, making surprises more likely to work in favor of the euro's strength.

The net long EUR position surged by $3.3 billion week to $5.6 billion over the reporting, shifting from neutral to a bullish position. The price is above the long-term average and continues to rise.

The EUR/USD pair slightly corrected after a strong rise on May 14-15, finding support in the 1.0800/20 zone. We expect the uptrend to resume with 1.0970/80 as the target. The likelihood of a deeper pullback to 1.0700/20 is low, as the bullish momentum is gaining strength.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.