EUR/USD traded lower on Thursday after the European Central Bank (ECB) left rates unchanged, as expected. However, these dips might present buying opportunities for bulls, given the market's expectations for the Federal Reserve's policy path potentially outweigh euro area considerations. ECB President Christine Lagarde mentioned that growth risks are tilted to the downside and that the Harmonised Index of Consumer Prices (HICP) should reach the target in the second half of 2025. She also emphasized that the rate path is not predetermined and that September's meeting is wide open. Investors interpreted this to mean that a rate cut is likely in September, with another cut anticipated in December. Consequently, German yields fell, while the dollar's yield advantage widened, causing German-U.S. spreads to reach their widest since July 11.

Despite some expecting a significant drop in EUR/USD, such an outcome may not materialize. U.S. short-term rates markets currently price in an over 85% probability that the Fed will cut rates by a total of 75 basis points in 2024, which is more aggressive than the projections from FOMC policymakers. If the Fed hints at a less restrictive stance at its July meeting, yields and the dollar could fall sharply, leading to tighter spreads. Presently, short-term rates markets expect the Fed to be more aggressive with rate cuts than the ECB, tilting the risks to the upside for EUR/USD.

In New York, EUR/USD opened near 1.0935 after trading at 1.0941 overnight on EBS, with the decline continuing. The pair neared 1.0940 following the ECB decision, weekly jobless claims, and the Philly Fed survey. Gains eroded as German yields sank during Lagarde's press conference, while U.S. yields rallied, widening the German-U.S. spreads. The dollar strengthened, with USD/CNH turning positive and nearing 7.2750 late in the day. Drops in stocks and gold helped underpin the dollar further. EUR/USD hit 1.0905 and neared 1.0915 late, down 0.23% in the New York afternoon session.

Despite the daily RSI falling, the pair might be consolidating gains from the recent rally. Rising monthly RSI and a hold above the 10-DMA are bullish technical signals. Upcoming Japan June CPI may impact risk sentiment in Asia, while German June PPI is due in Europe. Additionally, speeches from Fed's Williams and Bostic are scheduled for Friday during New York hours.