EUR/USD bolstered by weakness in USD flows on Monday

• EUR/USD remains trapped in near-term congestion, but intraday price action is drifting into the high side.
• It's a thin economic data docket overall this week as headlines continue to dominate market flows.
• Thursday will be the key data day for EUR/USD, with EU and US PMIs on the offering.

EUR/USD tested into the high end on Monday, drifting briefly toward the 1.1300 handle before settling back slightly, although the pair still ended the day higher overall. However, Fiber remains trapped in a near-term consolidation zone.

Last Friday, the Moody's ratings agency downgraded the United States (US) by removing its final AAA rating on Treasuries, citing increasing US debt and long-standing government deficits that various presidential administrations either neglect or fail to manage effectively. While initial investor reactions were shaky, sentiment quickly stabilized and the impact on US creditworthiness was largely dismissed. However, the Treasury markets have their challenges: 30-year yields surpassed 5% on Monday, and 10-year yields exceeded 4.5%.

This week, Federal Reserve (Fed) officials have been actively working to manage market expectations regarding potential rate cuts. Fed policymakers are consistently reminding investors that ongoing tariff and trade policies in the US complicate forecasts of the domestic economy, which in turn influences policy rate adjustments.

On Thursday, reports on the German and pan-European HCOB Purchasing Managers Index (PMI) will be released, presenting a double-header of business expectations surveys on both sides of the Pacific. A moderate rise is anticipated for both the German and EU-wide PMIs. The key economic data release from the US will be the S&P Global PMI figures for May, where median market expectations suggest a slight decline in both manufacturing and services components of the PMI report due to the impact of tariffs on business spending.

EUR/USD price action

Monday's bullish push saw EUR/USD approach the 1.1300 handle, but buyers remain unable to recapture the key technical level. Price action has hit a consolidation phase after finding technical support from the 50-day Exponential Moving Average (EMA) near 1.1085. Momentum in either direction has stalled out, and technical oscillators are getting stuck in midrange zones.

EUR/USD daily chart