EUR/USD holds above 1.1440 as ECB cuts rates; focus shifts to US NFP data

• EUR/USD trims intraday spike after Lagarde hints at nearing end of easing cycle.
• The ECB lowers rates to 2% as expected, but its statement suggests a cautious, data-dependent path ahead.
• Lagarde signals policy is "well-positioned" and hints a possible pause in July; market reacts with volatility.
• EUR/USD spikes to 1.1498 before easing; weak US jobless data keeps Fed rate cut hopes alive ahead of NFP.

EUR/USD holds onto earlier gains of over 0.20% after the European Central Bank (ECB) grabbed the headlines, reducing rates but leaving the door open for a pause at the upcoming July 24 meeting. At the time of writing, the pair trades at 1.1441 after bouncing off daily lows of 1.1404.

The ECB decided to reduce interest rates to 2%, as expected by market participants, although it has left the door open for a pause. The decision was not unanimous, with one dissenter, most likely Robert Holzmann, who, in the run-up to the meeting, favored a cut after the June or July meeting.

In the statement, the ECB outlined its meeting-by-meeting path and updated its projections for growth and inflation. At ECB President Christine Lagarde's press conference, she said that monetary policy is "well-positioned" around the current uncertain outlook, adding that the central bank is close to ending the easing cycle.

EUR/USD spiked sharply towards its daily high of 1.1498 before retreating somewhat to current exchange rate levels.

Across the pond, the US Bureau of Labor Statistics confirmed signs of a cooling labor market, as jobless claims rose with more people filing for unemployment insurance. Meanwhile, the US trade deficit narrowed in April, according to the Bureau of Economic Analysis, as businesses eased front-loading of goods ahead of incoming tariffs.

Federal Reserve (Fed) speakers grabbed the headlines, led by Governor Adriana Kugler and regional Fed Presidents Patrick Harker and Jeffrey Schmid. The Greenback trimmed some of its earlier losses, as revealed by the US Dollar Index (DXY). The DXY, which tracks the buck's value against six peers, is virtually unchanged at 98.75.

EUR/USD traders' eyes are on the US Nonfarm Payroll figures, which are expected to decrease from 177K to 130K in May. The Unemployment Rate is projected to remain unchanged at 4.2%.

Daily digest market movers: EUR/USD trims gains as Fed officials turned cautious ahead US jobs data

• EUR/USD uptrend remains intact, but it would be premature to assume it will remain so, given the uncertainty on US and Eurozone economic data releases.
• Initial Jobless Claims for the week ending May 31 increased by 247K, above estimates of 235K and up from the previous week's 240K. The data reinforced by the ADP Employment Change report for May could be a prelude for a negative Nonfarm Payrolls report.
• The US Trade Balance revealed that the deficit narrowed sharply in May, contracting by 55.5% to $ 61.6 billion, the lowest since September 2023.
• Kugler said that monetary policy is well-positioned for any changes in the macroeconomic environment, adding that she's already seeing the effects of higher tariffs and expects inflation to rise over 2025.
• Philadelphia Fed Patrick Harker said that amid uncertainty, the Fed must wait and see on the next policy steps. He said that the Fed may face climbing inflation and unemployment at the same time. A slow disinflation justified the central bank's holding steady rates.
• Kansas City Fed Jeffrey Schmid commented that he's focused on maintaining the Fed's credibility regarding inflation and expects tariffs to be reflected in prices in the upcoming months.
• ECB officials reportedly expect rate cuts to be paused at the July meeting, according to Bloomberg. "Some officials see reductions in borrowing costs as maybe already finished, while others still back another move -- probably in September, according to the people."
• Financial market players do not expect that the ECB would reduce its Deposit Facility Rate by 25 basis points (bps) at the July monetary policy meeting.

Euro technical outlook: EUR/USD reclaims 1.1400 but stalls below 1.1440

EUR/USD uptrend remains intact, but buyers seem reluctant to push prices to achieve a daily close above 1.1450. Momentum seems to be fading as depicted by price action and the Relative Strength Index (RSI). The RSI's slope is turning flat, an indication that bulls are taking a respite.

For a bullish continuation, the EUR/USD pair must close above 1.1454 on a daily basis. If surpassed, the pair could challenge the current week's peak of 1.1494, followed by 1.1500 and April highs near 1.1572, ahead of 1.16.

Conversely, if EUR/USD falls below the June 2 daily low of 1.1344, a move to 1.13 is on the cards. A breach of the latter would expose the 20-day Simple Moving Average (SMA) at 1.1284, followed by the 50-day SMA at 1.1218 and 1.1200.