The US Dollar (USD) continued its downward trend on Wednesday, with the EUR/USD pair reaching fresh four-month highs above 1.0900 following suspected intervention by the Bank of Japan (BoJ) to support the Japanese yen.
Amidst this, the USD Index broke below the key 104.00 support level, while bond demand in the US and German markets led to lower yields across various maturities.
Investors are now looking ahead to the European Central Bank (ECB) meeting on Thursday, where rates are expected to remain unchanged, despite anticipation of future cuts later in the year. On the other hand, there is uncertainty surrounding the Federal Reserve’s (Fed) rate cuts, with debates ongoing about potential cuts this year.
Market indicators suggest a high probability of lower rates at the Fed’s September meeting, with another cut priced in by year-end. Some Fed officials have hinted at potential rate cuts, while economic recovery prospects in the Eurozone and cooling US economic indicators may align monetary policy stances between the Fed and ECB.
Looking ahead, upcoming US data, Fed statements, and the ECB meeting will drive short-term price movements for the EUR/USD pair.
Technical Analysis: EUR/USD Short-Term Outlook
The EUR/USD pair faces resistance levels at 1.0948 and 1.0981, with further upside potential towards the psychological 1.1000 level. On the downside, support lies at the 200-day SMA of 1.0808 and the June low of 1.0666.
Overall, the uptrend remains strong, with potential for further gains if key resistance levels are breached. Short-term charts indicate solid uptrend momentum, with initial support at 1.0861 and 1.0791, and resistance at 1.0948 and 1.0981. The RSI stands at approximately 68.
For investors and traders, understanding the current market dynamics and potential future developments in monetary policy can help in making informed decisions about trading the EUR/USD pair.