The Euro rallied a bit during the early hours on Monday as the markets continue to bet on rates dropping in the USA.
EUR/USD
The Euro rallied a bit during the early hours on Monday as the US dollar has seen quite a bit of softness overall. The interest rate holds last week where the Governing Council at the ECB kept the deposit rate at 2% while inflation undershot expectations in January gives us an idea that the ECB might cut, but President Lagarde refused any type of talk about imminent rate cuts.
At the same time, the US Dollar Index has been falling, and Greenback is under pressure following weak US labor market data, which has led traders out there to front run the idea of more aggressive Fed easing for the remainder of 2026. I personally feel this is nonsense, but this has been what the market's been doing. It always tries to front run Federal Reserve aggressive rate cuts and then something comes out and it smacks it back down. I suspect we may see the same type of attitude here.
A Bullish Trend with Consolidation Ahead
Now, we are in a bullish trend; this much is true, and I don't necessarily think that there's anything to keep the Euro from rising, but I don't think it's the slam dunk type of trade that some people believe. After all, inflation numbers in the US remain very sticky. Plus, there is a distortion in the US right now because the migrant workers that have left the country have left a lot of jobs unfilled.
While there aren't as many jobs added, there are fewer people out there filling them, so I think that's something that will become a conversation later in the year. The 1.21 level was tested as resistance. We could get there, but you are already starting to see later in the day a little bit of hesitation. I think we're going to enter a fairly tight consolidation range here.
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