EUR/USD: Prime Time for Event Traders

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  Wolfgang Hagl
  Redaktor

The latest labor market report shows once again that the world’s largest economy is in surprisingly robust shape. In May, 139,000 non-farm jobs were created in the US, 9,000 more than economists had expected. In addition to the jobs data, inflation plays a key role in US monetary policy. This afternoon will show how inflation has recently developed. The U.S. Bureau of Labor Statistics will publish the Consumer Price Index (CPI) for May 2025 at 2:30 p.m. Our time. On average, economists expect the inflation rate for the year as a whole to be 2.5%. This would mean that it would have accelerated by 0.2 percentage points compared to the previous month and would significantly exceed the Fed’s target of 2%.

Conspicuous discrepancy

Robust economy, increased inflation – the conditions on the USD bond market match this mixed situation. The 10-year Treasury is currently yielding 4.49%. This represents a premium of almost 200 basis points over the German government bond. Compared to the Swiss Confederation, the USD benchmark bond yields a whopping 4.2 percentage points more. Despite the enormous interest rate advantage, the US dollar – both against the Euro as well as in relation to the Swiss Franc is under pressure. The weakness has a lot to do with the change of power in Washington D.C.. Since returning to the White House, Donald Trump has caused enormous uncertainty on the currency and bond markets. In addition to his constant tirades on customs policy, the president is weakening confidence in the dollar with attacks on the Federal Reserve. In the current issue of payoff magazine we take a detailed look at the dollar’s tarnished status as the world’s reserve currency.

Explosive auctions

Events are coming up in the next few days that are likely to make traders’ fingers tingle. Depending on how they go, they could deal the greenback the next blow. Today and tomorrow, the United States will raise fresh money via the bond auction. On Wednesday, 10-year Treasuries with a volume of USD 39 billion are to be issued. On Thursday, the Treasury Department will auction 30-year debt totaling USD 22 billion. “These once-routine auctions will become a litmus test for appetite at home and abroad for U.S. government bonds,” writes Reuters in a preliminary report. The focus is primarily on long-dated bonds, as demand for such securities is generally weak at the moment. “The 30-year bond is the poster child for all the market’s fiscal worries,” analyst Guneet Dhingra from BNP Paribas in New York told Reuters.

Clear consensus

Those responsible at the Fed are also likely to keep a close eye on the upcoming auctions. The Federal Open Market Committee will hold its next meeting next Tuesday. In view of the robust economy and the continued high level of inflation, it is considered a foregone conclusion that those responsible will continue to hold their feet to the fire and leave the target rate at the 4.25% to 4.50% range. According to the CME FedWatch tool, the probability of this is 99.9%. Fed Chairman Jerome Powell is therefore likely to continue to withstand pressure from the White House. The President has been calling for interest rate cuts for months and does not shy away from personal attacks on the top monetary watchdog. It will be interesting to see whether and, if so, how Powell will comment on the Trump administration’s policies and their consequences for the economy, inflation and monetary policy.

Investment solutions

CPI data, bond auctions, Fed decision – it’s a real festive season for event traders. The EUR/USD FX pairing looks particularly exciting in the run-up to the event. The euro is consolidating above USD 1.14. The trend is still pointing upwards and the steep upward trend launched at the end of February is intact. At the end of May, the chart technique produced a “golden cross”. This is when a moving average with a shorter time frame crosses its counterpart based on a longer period from below. In the case of EUR/USD, the 200-day line was crossed by the 100-day line. With this signal behind it, the euro could now resolve a short-term triangle constellation to the upside. The Mini-Future Long with ISIN CH1408678014. The security traded by BNP Paribas on Swiss DOTS participates in rising EUR/USD prices with a leverage of currently 7.9. If, on the other hand, the greenback were to stage a comeback and the euro were to fall out of the outlined triangle, the short counterpart with ISIN CH1436575364 would gain disproportionately. Caution: Both products could result in high losses if the respective trading strategy does not work out.