EUR/USD is flat in the mid-1.0800s. Waiting for interest rate cut signals from the Federal Reserve and ECB

• EUR/USD oscillated within a narrow trading band on Tuesday amid mixed fundamental clues.
• Traders also decided to wait and see before risking a major central bank event this week.
• The decline appears limited as bets on more aggressive easing by the ECB subside.

The EUR/USD pair is struggling to capitalize on the strong gains recorded over the past two days and is oscillating in a narrow trading band during Tuesday’s Asian session. Spot prices are currently trading in the mid-1.0800 range, little changed on the day and just below the one-week high hit on Monday.

Traders are now reluctant and prefer to wait for this week’s major central bank event risks before making aggressive directional bets, which in turn leads to subdued range-bound price action in the EUR/USD pair. Federal Reserve Chairman Jerome Powell’s congressional testimony on Wednesday and Thursday will be reviewed for clues about the path to lower interest rates. This, along with the European Central Bank’s (ECB) monetary policy decision on Thursday, will help determine the near-term trajectory of the currency pair.

In addition to this, investors this week will be faced with important US macro data releases scheduled for release early in the new month, including closely watched monthly employment details and Friday’s non-farm payrolls (NFP) report. Meanwhile, declining bets on a sharp interest rate cut by the ECB continue to act as a tailwind for the shared currencies. On the other hand, the US dollar (USD) weakened on expectations that the Federal Reserve will cut interest rates from June and support the EUR/USD pair.

That said, a slight deterioration in global risk sentiment, as depicted by the easing mood in equity markets, appears to be benefiting the safe-haven greenback and limiting the pair’s upside. Therefore, it would be prudent to wait for strong follow-up buying before the EUR/USD pair shows a nice bounce from the recent sub-1.0700 levels or positions the three-month lows reached on February 14. Traders are now looking to the end. The Eurozone Service PMI is announced ahead of the US ISM Service PMI.