Traders remain interested in the US dollar. They are pricing in the possibility of a further rise in the key interest rate by the Fed. Notably, in Europe, such a scenario is also possible. However, investors will hardly change their preferences.
According to preliminary estimates, in May, the eurozone inflation slackened to 6.1% from 7.0%. The slowdown turned out to be more significant than an anticipated drop to 6.3%. In this light, future actions of the European Central Bank are not causing any questions.
In other words, the central bank is unlikely to raise the key rate higher. It is expected to take a pause to assess the current situation. Nevertheless, the US dollar did not increase. The fact is that traders priced in such an outcome yesterday after the publication of the inflation figures in France and Germany.
Now, a lot will depend on the US ADP employment data. According to the forecast, the US economy will add just 200 thousand jobs. This is not enough to maintain stability in the US labor market. The expected report is pointing to a rise in the US unemployment rate. Notably, the US Labor Department data is due on Friday. Against the backdrop, the US dollar may slump amid overbought conditions.
What do we see on the trading charts ahead of the US trading session?

The euro/dollar pair reached the level of 1.0635 because of the inertial movement. This proves once again that the euro is oversold in the short-term periods.
However, demand for the greenback is still high. That is why the euro may resume falling if it returns to this cycle’s low. Traders are likely to ignore oversold conditions. The longer the inertial movement is, the less stable speculators become. It means that the number of short positions may tumble at any moment, thus spurring the price reversal.

Meanwhile, changes in the pound/dollar pair are not that sharp. Last week, a decline in the pair slackened, thus causing stagnation and a rebound.
If the price consolidates above 1.2500, the pound sterling will start recovering after the downward correction. However, pressure on the euro is capping the pound’s growth because of the positive correlation between the currencies. That is why the quote may return to the current low instead of recovering.



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00:00 INTRO
00:22 EUROZONE ANNUAL INFLATION RATE
00:44 ECB KEY INTEREST RATE
01:09 US
01:46 EUR/USD
02:26 GBP/USD