The EUR/USD pair saw significant gains on Wednesday as the US Dollar (USD) came under pressure following the Federal Open Market Committee (FOMC) meeting. Federal Reserve Chief Powell hinted at a potential rate cut in September, leading to a decline in the Greenback.
The USD Index (DXY) briefly dropped below the 104.00 support level after a hawkish Bank of Japan (BoJ) meeting and signals of a rate cut by the Fed. The Fed, while keeping rates unchanged, emphasized the need for more confidence in controlling inflation before considering a rate cut.
Powell’s comments on potential rate cuts in September, based on inflation readings and economic growth, added to the downward pressure on the Dollar. The policy divergence between the Fed and the European Central Bank (ECB) is expected to continue, with both likely to cut rates soon.
On the euro side, the rise in the euro bloc’s Inflation Rate in July may not deter the ECB from reducing rates in September. The EUR/USD pair’s short-term technical outlook suggests potential support levels at 1.0798, 1.0793, and 1.0666 on the downside, and resistance at 1.0948, 1.0981, and 1.1000 on the upside.
Overall, the pair’s bearish bias could return if it remains below the critical 200-day SMA at 1.0822. The near-term consolidation and RSI rebound suggest potential fluctuations in the short term.