EUR/USD slips below 1.1400 mark amid notable USD strength, downside seems limited
EUR/USD meets with a fresh supply on Tuesday amid the emergence of some USD buying.
US fiscal concerns and Fed rate cut bets should cap the USD gains, and support the major.
The ECB's relatively hawkish outlook could support the EUR and warrants caution for bulls.
The EUR/USD pair struggles to capitalize on the previous day's move higher and attracts fresh sellers near the 1.1435 region during the Asian session on Tuesday. The intraday slide is sponsored by a goodish pickup in the US Dollar (USD) demand and drags spot prices back below the 1.1400 round figure in the last hour.
Friday's stronger-than-expected US Nonfarm Payrolls (NFP) report dampened hopes for imminent Federal Reserve (Fed) interest rate cuts this year. This, along with the optimism over the resumption of US-China trade talks, prompts traders to lighten their USD bearish bets, which, turns out to be a key factor exerting pressure on the EUR/USD pair. However, with negotiations extending to a second day in London, traders might refrain from placing aggressive directional bets.
Furthermore, traders are still pricing in a greater chance that the US central bank will lower borrowing costs in September. This, along with concerns about the US government's financial health, might cap further USD appreciation and act as a tailwind for the EUR/USD pair. In contrast, the European Central Bank (ECB) hinted at the end of rate cuts during a meeting held last week. This could further benefit the shared currency and contribute to limiting losses for the currency pair.
Traders might also refrain from placing aggressive bets ahead of the release of US inflation figures this week. Hence, it will be prudent to wait for some follow-through selling before positioning for an extension of the recent pullback from the vicinity of the 1.1500 psychological mark, or the highest level since April 22 touched last week. In the absence of any relevant macro releases, either from the Eurozone or the US, the EUR/USD pair remains at the mercy of the USD price dynamics.
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