Will Euro Bulls Sustain as ECB Rate Cut Looms?

Forex

Central Bank

Summary:

Recent weak US economic data have dragged the US dollar lower, while Eurozone economic data have shown resilience, supporting the Euro's upward movement.

BUY EURUSD

Close Time

CLOSED

1.14154

Entry Price

1.16800

1.13050

1.16370 -0.00056 -0.05%

140.4

Pips

Profit

1.13050

1.15558

Exit Price

1.14154

Entry Price

1.16800

Fundamentals

Recent US economic data have been notably weak. The May ADP employment report showed an increase of only 37,000 jobs, significantly below the expected 110,000, indicating a clear cooling in the labor market. Coupled with President Trump's public pressure on the Fed to "cut rates immediately," the market's probability of a rate cut in September has soared to 75%. US Treasury yields have fallen across the board (with the 10-year yield dropping to 4.37%), and the US Dollar Index has lost its 99 level, providing upward thrust for the Euro.

Moreover, the US May ISM Non-Manufacturing PMI unexpectedly fell below the neutral level to 49.9, with the new orders index plummeting to 46.4. However, the prices paid index soared to 68.7, highlighting the risk of "stagflation" and further diminishing the appeal of US dollar assets.

In the Eurozone, although the market widely expects the ECB to cut rates by 25 basis points to 2% today, economic data have shown resilience. The Eurozone's May Composite PMI final reading of 50.2 exceeded expectations, and manufacturing output has expanded for two consecutive months.

CFTC positioning data show that the euro's net short position has reached a historical high. If the ECB removes the "continued easing" wording from its statement, it could trigger a large-scale short-covering rally.

Technical Analysis

On the daily chart, EURUSD has been running along the upward trend line, showing a clear medium-term upward trend. After opening today, the price found support around 1.1400 and has attempted multiple times to break through the resistance zone of 1.1435-1.1450. The daily MACD indicator shows the fast line above the zero axis and forming a bullish divergence with the signal line, with the red histogram significantly expanding. This chart indicates a further strengthening of the medium-term bullish momentum.

Currently, if the price can hold above 1.1450 after the ECB meeting, the technical pattern will reinforce the upward trend and open up the upside space. Conversely, if the price breaks below 1.1350, it may retest the 1.1280 support level.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.1410

Target Price: 1.1680

Stop Loss: 1.1305

Valid Until: June 19, 2025, 23:00:00

Support: 1.1357/1.1312

Resistance: 1.1454/1.1573

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

This suggests that the recent downward pressure may be losing steam, increasing the likelihood of a bullish reversal.

BUY USDCHF

Close Time

CLOSED

0.81680

Entry Price

0.82470

0.81350

0.80661 +0.00206 +0.26%

33.0

Pips

Loss

0.81350

0.81348

Exit Price

0.81680

Entry Price

0.82470

In a Truth Social post on Wednesday, U.S. President Donald Trump renewed his public pressure on Federal Reserve Chair Jerome Powell, calling for a reduction in interest rates. His comments arrive at a time when mixed economic indicators have created additional uncertainty around the Fed’s next steps on monetary policy.

One such indicator was the ISM Services PMI for May, which dropped to 49.9 from 51.6 in April—slipping below the key 50 threshold and falling short of expectations set at 52. The reading signals a slight contraction in the services sector, a cornerstone of the U.S. economy.

Further insights from the report showed a notable uptick in the Prices Paid Index, which rose to 68.7 from 65.1, suggesting sustained inflationary pressures on input costs. At the same time, the Employment Index edged higher to 50.7 from 49, hinting at some underlying labor market resilience.

Chicago Fed President Austan Goolsbee reiterated the Federal Reserve’s cautious tone, emphasizing the rising uncertainty brought about by President Trump’s increasingly assertive stance on tariffs. Goolsbee noted that these trade policies are now being factored into the Fed’s risk assessments due to their potential to disrupt broader economic momentum.

Echoing this cautious view, Fed Governor Lisa D. Cook stressed that even with current economic stability, the risks posed by escalating trade tensions remain a serious threat to long-term economic performance.

Adding to the unease, the ISM Manufacturing PMI for May fell slightly to 48.5 from April’s 48.7, marking a third consecutive month of contraction. While there were some minor rebounds—New Orders improved slightly to 47.6 from 47.2, and Employment rose to 46.8 from 46.5—the Import Index tumbled to 39.9, reinforcing concerns over weakening global trade flows and tariff-related disruptions.

Meanwhile, in Switzerland, the latest Consumer Price Index (CPI) data showed that inflation remained subdued. Annual CPI declined by 0.1% in May, compared to flat growth in April, in line with economists' forecasts. This suggests that price pressures in the Swiss economy remain muted, reinforcing the case for a patient stance by the Swiss National Bank.

On a monthly basis, CPI ticked up by 0.1%, matching expectations. The increase was primarily driven by higher prices for apartment rents, overseas holiday packages, and fresh produce. However, these gains were partially offset by declining costs for air transport, temporary lodging, and heating oil—highlighting a mixed inflationary environment. Potential Rebound From Support Could Fuel USDCHF Bulls_1

Potential Rebound From Support Could Fuel USDCHF Bulls_1

Technical Analysis

USD/CHF experienced a sharp decline after testing resistance around the 0.8247 level, an area marked by the convergence of the 100-period and 200-period moving averages on the 1-hour chart. Despite this bearish momentum, the pair is now hovering near the 0.8170 level, which appears to be emerging as a potential support zone.

This price level has shown signs of holding firm, and if buyers regain control here, the pair could stage a rebound, paving the way for renewed upward momentum and a possible price consolidation above. The relative strength index (RSI) has dropped to 27, entering oversold territory. This suggests that the recent downward pressure may be losing steam, increasing the likelihood of a bullish reversal.

However, if bearish sentiment persists and the pair breaks below the current support, USD/CHF could drift toward the lower boundary of the descending channel. Such a move would likely bring fresh support into play, potentially offering bulls another opportunity to regain control from lower levels.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8168

Target price: 0.8247

Stop loss: 0.8135

Validity: Jun 13, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Economic

Central Bank

Summary:

This level aligns with previous swing highs and coincides with the psychologically significant 0.6500 mark, a zone that has historically acted as resistance.

SELL AUDUSD

Close Time

CLOSED

0.64985

Entry Price

0.64600

0.65200

0.66237 -0.00146 -0.22%

21.5

Pips

Loss

0.64600

0.65201

Exit Price

0.64985

Entry Price

0.65200

In a post on Truth Social on Wednesday, U.S. President Donald Trump publicly urged Federal Reserve Chair Jerome Powell to lower interest rates. This statement comes amid a series of mixed economic signals that have added complexity to the Fed’s policy outlook.

U.S. services sector activity showed signs of softening in May, with the Institute for Supply Management (ISM) Services PMI slipping to 49.9 from April’s 51.6. The reading fell short of market expectations of 52, indicating a modest contraction in the sector.

Digging deeper into the report, the Prices Paid Index—a key gauge of input inflation—rose to 68.7 from 65.1, suggesting persistent pricing pressures. Meanwhile, the Employment Index improved modestly to 50.7 from 49, offering some resilience on the labor front.

Chicago Fed President Austan Goolsbee maintained a cautious stance consistent with broader Fed commentary. While acknowledging the underlying strength of several economic indicators, he flagged the growing uncertainty tied to Trump’s assertive tariff rhetoric. Goolsbee noted that the Fed is beginning to factor in the potential fallout from broad trade restrictions.

Echoing that caution, Fed Governor Lisa D. Cook highlighted that despite the economy’s relative stability, trade risks continue to cast a shadow over long-term growth prospects.

Meanwhile, the ISM Manufacturing PMI for May added to concerns, dipping to 48.5 from April’s 48.7—marking the third straight month of contraction. Though some components saw minor improvements—New Orders rose slightly to 47.6 from 47.2, and Employment edged up to 46.8 from 46.5—the Import Index dropped significantly to 39.9, reflecting weaker global trade activity and ongoing tariff-related drag.

On the other side of the globe, Australian economic data released on Wednesday painted a picture of slowing momentum. According to the Australian Bureau of Statistics (ABS), the country's GDP rose just 0.2% quarter-on-quarter in Q1 2025, down from 0.6% in Q4 and falling short of the 0.4% forecast. Year-on-year growth stood at 1.3%, unchanged from the previous quarter but below the expected 1.5%.

Complementing the GDP figures, the S&P Global Australia Composite PMI edged down to 50.5 in May from 50.6 in April, signaling only marginal expansion. The Services PMI ticked up slightly to 50.6 from 50.5, reflecting a mild pickup in service-sector activity. Bearish Pullback in Sight Near Key Resistance_1

Bearish Pullback in Sight Near Key Resistance_1

Technical Analisys

The AUD/USD pair gained upward momentum and climbed to a local high of 0.6504 during the current session. This level aligns with previous swing highs and coincides with the psychologically significant 0.6500 mark, a zone that has historically acted as resistance. Given its technical significance, this area could prompt profit-taking and spark a short-term pullback toward the 0.6460 region, where the 100-period and 200-period moving averages converge—potentially serving as dynamic support.

The Relative Strength Index (RSI) surged to a peak of 72, entering overbought territory. While this condition may attract sellers looking for a reversal, it’s worth noting that there is no bearish divergence at present, as the higher RSI reading is consistent with a higher price level. This suggests that the prevailing bullish trend remains intact, and any downside move may prove to be merely a corrective retracement before the uptrend resumes.

Trading Recommendations

Trading direction: Sell

Entry price: 0.6498

Target price: 0.6460

Stop loss: 0.6520

Validity: Jun 13, 2025 15:00:00

Risk Warnings and Disclaimers

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Adam

Forex

Summary:

The CAD/CHF pair traded around 0.5990 as the Canadian dollar came under pressure from the Bank of Canada (BoC) keeping interest rates at 2.75% and the prospect of a rate cut by the Swiss National Bank (SNB) amid negative Swiss inflation data...

SELL CADCHF

Close Time

CLOSED

0.59800

Entry Price

0.59500

0.60300

0.58213 +0.00006 +0.01%

29.5

Pips

Loss

0.59500

0.60095

Exit Price

0.59800

Entry Price

0.60300

Macro Overview

The BoC decided on June 4, 2025 to keep its policy rate unchanged at 2.75%, stressing the need for more data to assess the impact of US trade policy and rising inventories.

Although Canada's GDP in the first quarter of 2025 increased by 2.2%, core inflation increased rapidly to 3.15%, causing the BoC to maintain a cautious stance and still prepare to cut interest rates in the second half of the year if the economy shows signs of weakness.

Meanwhile, the SNB is under great pressure after inflation returned to -0.1% in May 2025, the first time it has fallen into negative territory since the pandemic, leading the market to expect the SNB to cut interest rates from 0.25% to 0% when they meet on June 19, 2025.

In the commodity market, Brent prices remained around $65/barrel, down slightly from the peak at the beginning of the month but still maintaining a stable view as OPEC+ is expected to increase production in August 2025 and global demand remains at an average level.

The sideways oil price is holding back the buying power of the CAD, as Canada is a major oil exporter. In this context, the SNB could intervene in FX to prevent the CHF from rising too much as the franc has strengthened more than 10% against the USD since the beginning of 2025, further creating conditions for the CHF to adjust lower against the CAD.

Market psychology

The overall market sentiment suggests that investors are torn between a future BoC tightening and a more aggressive SNB easing. The latest CFTC report shows that hedge funds have been reducing their long CAD/CHF positions over the past week, reflecting caution and anticipation of the SNB meeting.

The “Fear Greed” index in the European foreign exchange market is maintaining near neutral levels, meaning that money has not yet flowed strongly into CHF as a normal safe haven, but is mainly maintaining a state of waiting for the reaction of the SNB and BoC.

The slight rally in CHF in recent weeks has subsided due to news of negative inflation and the possibility of interest rates going to 0%.Meanwhile, CAD has not been able to break out strongly because BoC has not yet given a specific cut signal, causing cash flow to not rush to increase long CAD/CHF positions.

Technical analysis

CAD/CHF hovers around 0.599 as BoC stands pat and SNB forecasts rate cut_1

CAD/CHF price around 0.5990 on M15 chart is currently just below the middle line of Bollinger Bands (20,0,2), with the middle band (MA20) estimated around 0.6000, the upper band around 0.6045 and the lower band around 0.5955.

The price “pullback” from the 0.6005–0.6010 zone (Ichimoku’s middle band and Kijun-sen zone) shows that sellers still have the upper hand in the short term.

On Ichimoku Kinko Hyo (9,26,52), M15 shows price below Kumo cloud, Tenkan-sen line (9) crosses below Kijun-sen (26) around 0.6005, sending short-term sell signal.

The front kumo cloud is still sloping down, creating resistance around 0.6020–0.6030. This suggests that selling pressure continues to dominate and the price will find it difficult to break above 0.6030 without a strong breakout.

The Stochastic Oscillator (5,3,3) indicator on the M15 chart is fluctuating around the 30 threshold, not yet in the oversold zone (below 20) but has a downward trend, implying that selling pressure still has room to push the price to test the lower Bollinger band (around 0.5955). RSI shows that the price is not oversold, there is still room to fall further if the SNB news causes a surprise..

Furthermore, the large forex trading volume for CAD/CHF has not shown a significant breakout, reflecting relatively thin liquidity at the current price range.