• EUR/USD scales higher for the second straight day amid some follow-through USD selling.
• The Fed-ECB policy divergence backs the case for additional gains amid the upbeat mood.
• The focus now shifts to the delayed release of the crucial US NFP report on Wednesday.

The EUR/USD pair is seen building on Friday's goodish rebound from the 1.1765 region or a two-week low and gaining positive traction for the second straight day at the start of a new week. The move higher lifts spot prices to the 1.1830-1.1835 resistance zone, marking the top end of a one-week-old range, and is sponsored by some follow-through US Dollar (USD) selling.

Concerns about a possible conflict in the Middle East eased after the US and Iran finished a round of talks on Friday. This, in turn, drags the USD Index (DXY), which tracks the safe-haven Greenback against a basket of currencies, away from a two-week top touched last Thursday and turns out to be a key factor acting as a tailwind for the EUR/USD pair. Furthermore, the diverging interest rate paths between the US Federal Reserve (Fed) and the European Central Bank (ECB) back the case for additional near-term gains for the currency pair.

According to the CME Group's FedWatch Tool, traders are currently pricing in the possibility that the US Fed will deliver at least two 25-basis-point rate cuts in 2026. The bets were reaffirmed by the incoming US data, which pointed to weakness in the labor market. In contrast, the ECB has been on hold since ending a year-long run of rate cuts in June, and surprisingly resilient growth has taken all pressure off policymakers to provide any further support. This is seen as another factor lending support to the EUR/USD pair and validates the positive outlook.

Traders, however, might refrain from placing aggressive directional bets and opt to wait for the delayed release of the crucial US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Wednesday. The closely-watched figures will play a key role in influencing the USD in the near term and provide some meaningful impetus to the EUR/USD pair. In the meantime, the broader fundamental backdrop seems tilted in favor of bulls and backs the case for further gains amid the absence of relevant macro data from the Eurozone or the US.