EUR/USD sees cushion below 1.0400, downside looks likely ahead of Fed and ECB Lagarde

• EUR/USD is mildly bided around 1.0400 amid a minor correction in the DXY.
• The Fed is expected to dictate a rate hike by 75 bps to fix the inflation mess.
• ECB Lagarde’s speech may provide a roadmap for elevating the rate cycle from July.

The EUR/USD pair is witnessing a minor cushion marginally below 1.0400 in the Asian session, however, more downside is still favored amid broader strength in the US dollar index (DXY). The major has extended its three-day losing streak after slipping below Monday’s low at 1.0400 and is expected to recapture its five-year low at 1.0345.

Investors are bracing for a tight monetary policy environment as price pressures are soaring in the US economy and households are facing the headwinds of lower-valued paychecks. Last week, the US Consumer Price Index (CPI) landed at 8.6%, much higher than the expectations of 8.3%. This has surprisingly raised the odds of a rate hike by 75 basis points (bps). It is worth noting that Fed chair Jerome Powell in his testimony stated that a 75 bps rate hike is not into consideration. However, to tame the roaring inflation, an extreme hawkish policy stance is highly required.

Meanwhile, the US dollar index (DXY) has witnessed a minor correction after failing to overstep the fresh 19-year high at 105.29.

On the euro front, the shared currency bulls have remained in the grip of bears after the European Central Bank (ECB) kept its monetary policy unchanged last week. ECB President Christine Lagarde decided to take the bullet itself despite soaring inflationary pressures. However, the guidance was hawkish and a rate hike by 25 bps in July is on the cards. This week, the speech from ECB Lagarde will remain in focus. The speech is expected to dictate the likely monetary policy action by in July.