• EUR/USD trades with a negative bias for the second straight day, though it lacks bearish conviction.
• The USD preserves the overnight modest gains, while reviving ECB rate cut bets undermine the EUR.
• Traders, however, seem reluctant and opt to wait for this week’s important releases from the US.

The EUR/USD pair attracts some sellers for the second consecutive day on Tuesday and hovers below mid-1.1800s amid a relatively quiet trading action during the Asian session. The broader fundamental backdrop, however, warrants some caution for bearish traders before positioning for deeper losses.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, preserves the overnight modest gains and holds steady above the 97.00 mark, which, in turn, exerts some downward pressure on the EUR/USD pair. The shared currency, on the other hand, is undermined by a gradual shift toward the possibility of a rate cut by the European Central Bank (ECB), bolstered by a fall in the Eurozone inflation to the lowest level since September 2024.

The upside for the USD, however, is more likely to remain capped on the back of dovish US Federal Reserve (Fed) expectations. In fact, traders ramped up bets that the US central bank will lower borrowing costs in June following the release of softer US consumer inflation figures last Friday. This comes amid concerns about the Fed's independence, which might hold back the USD bulls from placing aggressive bets and help limit the downside for the EUR/USD pair.

Adding to this, the underlying bullish sentiment might cap the safe-haven buck. Traders might also opt to wait for more cues about the Fed's rate-cut path before placing fresh directional bets. Hence, the focus will remain glued to the FOMC minutes on Wednesday. Apart from this, the Advance US Q4 GDP report, the US Personal Consumption Expenditure (PCE) Price Index, and the global flash PMIs would provide a fresh impetus during the latter part of the week.