The euro-dollar pair is steadily rising, approaching the 19 figure. The fundamental backdrop for the pair is favorable for continued growth. Among the main reasons are the likely divergence in the positions of the Federal Reserve and European Central Bank, a significant improvement in investor sentiment in the eurozone, and a decrease in risk aversion amid negotiations between the US and Iran on the nuclear program. Additionally, the dollar has come under pressure due to a series of weak US labor market reports published ahead of the January Non-Farm Payrolls (NFP). All these fundamental factors are working in favor of EUR/USD buyers, allowing the pair to break above the 1.1870 resistance level (the upper boundary of the Kumo cloud on the H4 timeframe).

According to data from the CME FedWatch tool, the market remains almost convinced that the Fed will keep all monetary policy parameters unchanged at its upcoming meetings in March and April. For example, the probability of a rate cut in March is only 15%, while in April it is 33%. The likelihood of a 25-basis-point cut in June is 70%. By the way, the June meeting will be chaired by Kevin Warsh, provided the Senate approves his nomination.

Dovish expectations regarding a June rate cut are linked not only to the "Warsh factor." Recent US labor market reports have disappointed dollar bulls. Last week, three reports—JOLTS, ADP, and Unemployment Claims—were released in the red zone, signaling a cooling labor market in the US.

In particular, the number of job openings fell in December to 6.542 million, the lowest level since 2020, indicating weak labor demand. The ADP report showed the US private sector added 22,000 jobs, which is nearly half of expectations (+45,000). Finally, the Unemployment Claims report showed an increase in claims for unemployment benefits: the figure rose by 231,000 against a forecast of an increase of 212,000.

In other words, there are noticeably fewer job vacancies, employment growth has weakened, and the number of new benefit claims has increased.

If the January NFP also comes out in the red zone, dovish expectations regarding further Fed actions will strengthen—the probability of a rate cut in April will rise to approximately 50%, and in June to 80-90% (assuming the rate remains unchanged in April). Moreover, even preliminary forecasts for the NFP signal weak dynamics in the US labor market in January. Expectations indicate that the unemployment rate will remain at 4.4%, with employment increasing by only 70,000. Even if the release meets expectations, dovish sentiment will likely persist, putting pressure on the greenback.

Meanwhile, the ECB, following its February meeting, not only kept all monetary policy parameters unchanged but also adopted a wait-and-see stance going forward. According to the central bank's members, inflation in the eurozone is "moving toward the target level," and the region's economy "looks resilient."

Such an optimistic "moderately hawkish" signal surprised many market participants, as just a day before the meeting, a report on CPI growth in the eurozone showed a slowdown in both overall and core inflation. However, the ECB essentially ignored this release, stating that it is focusing on the indicator's medium-term dynamics.

Thus, the current situation signals an emerging divergence in the ECB's and the Fed's paths. Most analysts lean toward the view that the ECB will keep interest rates at their current level this year; any easing of monetary policy is likely only in the second half of the year and only in response to deteriorating data. In contrast, the probability of a Fed rate cut in the first half of the year is gradually (but surely) increasing. If the NFP and CPI reports, which will be published in the US this week, reflect a cooling labor market and a slowdown in inflation, the market will again start discussing the impending divergence in monetary policy between the ECB and the Fed.

Additionally, geopolitical factors are providing support for EUR/USD buyers. Most analysts have positively assessed the outcomes of the first round of negotiations between the United States and Iran regarding the Iranian nuclear program. And although the parties remain far apart, maintaining a general commitment to diplomatic dialogue supports investor interest in risk assets, including the euro.

The Sentix investor confidence indicator, published on Monday, has also favored EUR/USD buyers. For six months—from August to January—this indicator was in negative territory; however, this month, it unexpectedly increased to 4.2 (against a forecast of -0.2), reflecting optimistic sentiments in the European business environment.

Thus, the established fundamental backdrop favors further growth of EUR/USD. At the moment, the pair is trying to consolidate above the upper boundary of the Kumo cloud on the four-hour chart (1.1870), after which the price will be above all Ichimoku lines and above the upper Bollinger Bands line. The nearest target for the upward movement is the 1.1910 level (the Tenkan-sen line on the D1 timeframe). The main target is 100 pips higher, corresponding to the level of 1.2010 (the upper Bollinger Bands line on the daily chart). However, to conquer the 20 figure, EUR/USD buyers need a "jackpot" in the form of weak NFP and poor CPI growth data.