Market Analysis

The EUR/USD pair builds on the previous day's late rebound from around 1.0950 and gains some positive traction during the Asian session on Friday. However, spot prices struggle to maintain this momentum and are currently trading near the 1.0975-1.0980 range, showing a modest increase of just over 0.05% for the day.

Several factors are driving fresh selling of the US Dollar (USD), which is providing some support to the EUR/USD pair. Despite Thursday's strong US economic data, investors are increasingly confident that the Federal Reserve (Fed) will start a policy-easing cycle in September, with a 25 basis point rate cut already priced in. This has led to a slight decline in US Treasury bond yields, putting downward pressure on the USD.

Additionally, the positive sentiment in global equity markets, reflecting a risk-on mood, is further diminishing the appeal of the safe-haven USD. Nonetheless, the potential for escalating conflict in the Middle East could bolster the USD. Expectations that the European Central Bank (ECB) might cut rates further, amid falling inflation in the Eurozone, are also limiting gains for the EUR/USD pair.

Despite these challenges, the EUR/USD pair remains on track for modest weekly gains. The dip-buying activity near the 1.0950 horizontal support level on Thursday suggests caution before anticipating further declines. Traders are now focusing on upcoming US economic data, including Building Starts, Housing Permits, and the Preliminary Michigan Consumer Sentiment Index, for short-term trading opportunities later in the North American session.

Paraphrasing text from "FX Street" all rights reserved by the original author.