EUR/AUD under slight pressure as ECB cuts interest rates to 2%

Summary:

EUR/AUD is trading around 1.7550 as the euro is under mild pressure from the European Central Bank (ECB) cutting interest rates to 2% and then signaling a possible end to its easing streak, while the Australian dollar is little changed after weak Q1 GDP growth data (0.2%)...

SELL EURAUD

Close Time

CLOSED

1.75750

Entry Price

1.75000

1.76200

1.61001 -0.00171 -0.11%

20.9

Pips

Profit

1.75000

1.75541

Exit Price

1.75750

Entry Price

1.76200

Macro Overview

First, on June 5, 2025, the ECB cut its policy rate by 25 basis points to 2%, warning that the easing cycle may be coming to an end as eurozone inflation fell to 1.9% in May, close to the bank's 2% target.

Figures from the June 4 PMI survey also showed that services activity in the eurozone weakened for the first time since November 2024, when the services PMI fell to 49.8 points, pulling the PMI composite index down to 50.2, the lowest since February 2025.

Against this backdrop, despite the ECB cutting interest rates, the euro only rose slightly as Lagarde reminded that further cuts would depend heavily on future data, limiting expectations of a more aggressive cutting cycle.

On the other hand, Australia announced that its GDP in the first quarter of 2025 increased by only 0.2%, lower than the expected 0.4% and down from the previous quarter's 0.6%, largely due to a decline in public spending and obstacles from severe weather affecting the mining and tourism industries.

The RBA had already cut interest rates to 3.85% on 20 May 2025 and is under pressure to cut further as inflation in Australia cooled to 3.2% (below the target of 2-3%) and is forecast to fall further in the next two quarters. This information has left AUD with little incentive to increase when considering the balance between expectations of further easing and the weak recovery of the economy.

Market psychology

The market is currently maintaining a cautious sentiment towards the EUR/AUD pair. Hedge funds have reduced their long EUR/AUD positions over the past week, suggesting that institutional investors are not rushing to enter positions before there is a clear signal from the ECB and RBA.

Although the ECB has cut interest rates to 2%, President Lagarde's statements highlighting the possibility of a pause in cuts at the next meeting have limited broad-based buying of the euro. At the same time, the AUD is also under pressure as GDP growth in the first quarter is slow and the RBA is likely to cut interest rates again in July, so money is not willing to buy AUD strongly.

As a result, EUR/AUD has been broadly in a narrow range this week, with the Asia-Pacific currency group’s “Fear Greed” index remaining neutral, reflecting the wait for more key data.

Technical analysis

EUR/AUD under slight pressure as ECB cuts interest rates to 2%_1

On the M15 chart of 06/06/2025, EUR/AUD is trading around 1.7850. Important technical levels are as follows:

The middle band (MA20) on the M15 timeframe is estimated around 1.7600, the upper band around 1.7700 and the lower band around 1.7500, indicating that the price is currently close to the lower Bollinger band. The fact that EUR/AUD has repeatedly failed to surpass the MA20 at 1.7600 and turned down from 1.7580 suggests that the short-term downtrend is still dominant.

On the M15 chart, EUR/AUD is currently below the Kumo cloud, with the Tenkan-sen (9) estimated at around 1.7575 crossing below the Kijun-sen (26) around 1.7590, sending a short-term sell signal. The front Kumo cloud is also sloping down, creating strong resistance in the range of 1.7580–1.7600. This highlights the possibility of the price continuing to retreat to the support zone of 1.7530 before a technical pullback.

Stochastic (5,3,3) on the M15 chart is moving down to the oversold zone (below 20), but has not yet reached the bottom, indicating that there is still room for sellers when the price approaches support. If Stochastic drops below 20 and maintains, the price may break the support zone of 1.7530 to head towards 1.7500.

Trading Recommendations

Based on macro and technical analysis on M15 timeframe, the strategy to sell (SELL) EUR/AUD on 06/06/2025 is as follows:

Entry: 1.7575

Take Profit: 1.7500

Stop Loss: 1,7620

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