The euro area PMI data was a bit mixed but at the balance, it was salvaged by the better German PMI figures. That continues to give the ECB a bit of breathing room after their impending June rate cut at least. That is helping the euro a tiny bit with the dollar also looking sluggish amid a better risk mood today.

Equities are keeping higher as the mood music is buoyed by Nvidia’s earnings beat after the close yesterday. That is helping to see the aussie and kiwi hold higher against the dollar as well.

Going back to EUR/USD, the pair fell to test its 100-day moving average (red line) after the French PMI data earlier. But since then, it has caught a bounce to trade back up to 1.0845 currently.

So, what’s next for the pair?

From a technical perspective, the pair is seeing layers of support from 1.0800-14 with the 200-day moving average (blue line) just under that as well as 1.0787. Those will be crucial in keeping any downside momentum from gathering pace for the time being.

As for the upside, there is modest daily resistance from the April high at 1.0885. And that is limiting any upside momentum for now.

So, something has to give on either side of those levels in order for the next trending leg to come by.

From a fundamental perspective though, the euro still has to figure things out on what the ECB is going to do after June. And that might take a while to sort out depending on inflation developments in the months ahead.

On the dollar side of the equation, it’s all about big data. And there is the US PMI readings to watch later at least.

That aside, it’s a tall order for traders to price in anything beyond two rate cuts for the Fed this year. That is likely to put a floor on any dollar declines until the Fed narrative changes. Currently, traders are back to pricing in ~40 bps of rate cuts for the year.

This article was written by Justin Low at www.forexlive.com.