FOREX Fundamental analysis for EUR/USD on May 17, 2024Evidence of the cooling of the United States economy continues to accumulate, but the Federal Reserve has not yet decided to reduce the federal funds rate. FOMC members John Williams Thomas Barkin and Loretta Mester say that the Central Bank will need more time to defeat inflation. These statements, along with a rapid increase in import prices and a good report on applications for unemployment benefits, led to a weakening of the EURUSD pair.As soon as the US dollar showed weakness, it immediately became the object of criticism. StoneX believes that the collapse of the dollar can occur for several reasons: an improvement in global risk appetite, the recovery of the Chinese economy and the hard course of the Bank of Japan. However, two of these three factors have come into question. Retail sales and fixed asset investments in China did not meet expectations, and hedge funds and asset managers, according to Bloomberg, used the April inflation report to buy dollars. The growth of the USDJPY exchange rate through currency correlation also affected the weakening of other assets.The appetite for risk is really increasing, as evidenced by the next records of stock indexes. However, the market often takes wishful thinking for granted. At the end of 2023, after the Fed forecast a rate cut at three meetings in 2024, investors expected six acts of easing.Now the situation is repeating itself. Weak data on the labor market, retail sales and industrial production have given rise to rumors that the July meeting of the Fed may present a surprise. Given that the Central Bank will have two more employment and inflation reports before that time, the likelihood of a rate cut is growing.Nevertheless, with 175 thousand new jobs and unemployment at 3.9%, the economy can hardly be called weak. Retail sales are rising by 3.5%, which makes it unlikely that the 2% inflation target will be reached soon. The Fed will probably have to wait until inflation drops to this value. Nordea predicts that rates will be lowered in December, rather than in September, which may lead to a drop in the EUR/USD pair to 1.07 by the end of July.The key question for EURUSD is whether the US economy will continue to cool down. If so, Treasury yields will fall, increasing the chances of the Fed easing monetary policy in July, which will lead to a drop in the dollar in forex currency trading. Otherwise, positive macro statistics will bring the greenback back to life.Investors are closing positions and going into standby mode, which may lead to a correction and consolidation of the EURUSD. While these boundaries are not defined, it is possible to use bounces from the support levels of 1.0835 and 1.08 to buy the pair.EUR/USD continues to decline for the second day in a row, correcting after strengthening at the beginning of the week. Today, the pair is trading at 1.0862. In the morning, traders did not show much activity, as they are waiting for the release of inflation data in the Eurozone.Consumer Price Index (CPI) The US grew by 3.4% in April, which is lower than the March strengthening of 3.5%. The base indicator excluding food and energy prices was 3.6% (YoY), which is lower than the previous value of 3.8%, but fully in line with market expectations. Despite the fact that inflation is still well above the 2% target, the data put pressure on the dollar. The decrease in CPI increased market expectations about a possible easing of the monetary policy of the Federal Reserve System (Fed) in the second half of the year.On Thursday, data on initial applications for unemployment benefits in the United States were also published. The number of applications for the week increased to 222 thousand, which exceeded forecasts. The indicator for the previous week was revised upward to 232 thousand. Despite the negative background, dollar buyers were able to take the initiative and ended Thursday's trading session on a "green" wave. The dollar was supported by comments from Fed representatives. Neil Kashkari, President of the Federal Reserve Bank of Minneapolis, expressed doubts that the current monetary policy has a sufficient impact on inflation and called for keeping rates at the current level for several more months. The head of the Federal Reserve Bank of New York, John Williams, noted that one positive inflation report is not enough to neutralize the negative data of previous months, so do not expect an early rate cut from the Fed.Today, traders' attention is focused on inflation data in the Eurozone. The European consumer price index is expected to remain at 2.4% in April, while the base index will be 2.7%. If the forecasts are confirmed, this will be another indication that inflation in the EU countries is gradually approaching the target level of 2%. This could allow the European Central Bank to consider cutting rates as early as June. Thus, the pressure on the euro may increase not only due to the recovery of the dollar, but also due to the high probability that the easing of the ECB's policy will occur earlier than in the United States.