EUR/USD consolidates last week's gains to the highest level since August, hovers around 1.0900

• EUR/USD struggles to capitalize on last week’s strong rally amid a modest USD uptick.
• Bets that the Fed is done raising interest rates might cap any meaningful USD recovery.
• Friday’s hawkish comments by ECB policymakers should offer some support to the Euro.

The EUR/USD pair is seen consolidating last week's strong gains to its highest level since August 31 and oscillating in a narrow trading band during the Asian session on Monday. Spot prices currently trade around the 1.0900 round figure and seem poised to prolong the recent breakout momentum through a technically significant 200-day Simple Moving Average (SMA).

The US Dollar (USD) kicks off the new week on a positive note and recovers a part of Friday's decline to over a two-and-half-month low, which, in turn, is seen acting as a headwind for the EUR/USD pair. Any meaningful USD recovery, however, still seems elusive in the wake of growing bets that the Federal Reserve (Fed) is done raising interest rates, bolstered by the US data indicating that inflation was cooling faster than anticipated,

Moreover, the markets have started pricing in the possibility of rate cuts during the first half of 2024, which led to the recent steep decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond touched a two-month low level of 4.379% on Friday, which, along with a stable performance around the equity markets, should keep a lid on any meaningful appreciating move for the safe Greenback.

The shared currency, on the other hand, might continue to draw support from hawkish remarks by the European Central Bank (ECB) officials on Friday, pushing back against expectations for early rate cut bets. Bundesbank President Joachim Nagel said on Friday that it would be unwise to start cutting interest rates too soon. Moreover, ECB policymaker Robert Holzmann argued that the second quarter was simply too soon for a rate cut.

The aforementioned fundamental backdrop validates the near-term positive outlook for the EUR/USD pair and seems tilted firmly in favour of bullish traders. Even from a technical perspective, last week's sustained breakout through the 100- and the 200-day SMAs confluence barrier suggests that the path of least resistance for spot prices is to the upside in the absence of any relevant macro data from the Eurozone or the US on Monday.

Technical levels to watch