US Dollar Uptrend Under Threat as Rate Cut Bets Rise; EUR/USD in a Prize Squeeze

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Forex Analysis by (Günay Caymaz) covering: EUR/USD, US Dollar Index Futures, US Dollar Index. Read (Günay Caymaz)'s latest article on

The PCE data met expectations on Friday, with Powell's remarks having minimal impact on market sentiment heading into the new week.

Investors also maintained expectations for three rate cuts this year, with some speculating on the possibility of up to five cuts depending on employment data.Despite Powell's emphasis on the Fed's cautious approach to rate cuts, economic data continues to support a robust US economy, alleviating recession concerns. However, this scenario has exerted some pressure on the dollar against major currencies.

Conversely, if it breaks below the 104 level, we may see a retreat to 103.70. Although this is a key support level, a deeper pullback to the 101.5 - 102.2 range could occur. This increases expectations that the Fed may cut interest rates in June while the ECB may cut rates in May. We see this situation reflected as a price squeeze in EUR/USD.Since last week, it has been trying to find support at 1.077. If the pair manages to hold on to this support point, the next bullish move could continue up to 1.092.

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