As the American session unfolded this Friday, we saw the EUR/USD pair climb to 1.0725. This movement comes on the heels of the latest US core PCE price index data, which revealed a much-anticipated decline in inflationary pressures for May. The core PCE, a critical measure of consumer price changes excluding volatile food and energy costs, grew at a modest pace of 0.1% month-on-month and 2.6% year-on-year.

The deceleration in core PCE growth is pivotal. Market sentiment is now leaning towards the Federal Reserve, possibly easing its monetary stance sooner than previously expected. Interest rate futures currently suggest two rate cuts this year, with a potential reduction starting as early as September. However, there's a bit of a tug-of-war in perspectives; Fed officials, as illustrated in the latest dot plot, seem to anticipate only a single rate cut this year.

Notably, Atlanta Fed President Raphael Bostic's recent remarks have added a layer of nuance. Bostic indicated that the Fed is gearing up for rate cuts, envisioning a series of reductions starting in the fourth quarter and continuing with four quarter-point cuts into 2025. His comments suggest a strategic shift towards a more definitive approach, as opposed to the previous "data dependency" narrative.

It's important to juxtapose Bostic's optimism with the cautionary tone of Fed Board of Governors member Michelle Bowman. Bowman emphasized that the Fed is not yet ready to consider rate cuts, underscoring the ongoing balancing act within the Fed's policy-making circles.

One noteworthy fact about recent EURUSD’s price action is consolidation in the triangle over the past two weeks, with price action converging near a critical support line around 1.0700. This pattern reflects market caution as traders await the outcome of the upcoming French elections. The RSI is hovering near the midline, indicating a balance between bullish and bearish momentum. Given the uncertainties, a breakout below the triangle could signal a bearish move, especially if right-wing parties in France gain more control, potentially exacerbating market fears and leading to increased euro volatility. Traders should monitor this support level closely, as a breach could set the stage for a significant downward trend:

The forthcoming French elections are a major focal point for European investors, with potential implications for fiscal policy and market stability. French President Emmanuel Macron's call for a snap election following his party's setback to Marine Le Pen’s National Rally adds a layer of political risk that traders must consider. 

Furthermore, the Eurozone's inflation landscape continues to evolve. Preliminary Harmonized Index of Consumer Prices (HICP) data for June, set to be released on Tuesday, will be a key indicator. Recent data shows a mixed picture: France's preliminary annual CPI edged down to 2.5%, Spain's annual HICP decelerated to 3.5%, and Italy presented a mixed bag. This backdrop of cooling inflation in major Eurozone economies bolsters the case for potential rate cuts by the ECB.