EUR/USD experienced additional selling pressure, nearing the 1.0900 level on Wednesday. This was driven by the ongoing recovery of the US Dollar against the weak Japanese Yen and positive global stock market sentiment.
The USD Index (DXY) climbed above 103.00 after a drop to 102.00 earlier in the week, supported by a decline in the Japanese yen and increased US yields. Concerns about a potential rate cut by the Federal Reserve eased, as Fed rate-setters dismissed fears of a recession but hinted at future rate reductions.
German 10-year bund yields also rose, reaching around 2.30%, in line with global trends. Market expectations are now leaning towards a 50 basis points rate cut by the Fed in September, with a 65% chance of this move according to CME Group’s FedWatch Tool.
While a rate cut may narrow the policy gap between the Fed and the ECB in the short term, the long-term outlook favors the US economy over its European counterpart. This suggests any weakness in the Greenback could be temporary.
EUR/USD Short-Term Technical Outlook
EUR/USD is expected to challenge the August high of 1.1008, with further resistance at 1.1139. Support levels include the 200-day SMA at 1.0830, the weekly low of 1.0777, and the June low of 1.0666.
In the short term, the pair may see consolidation, with resistance at 1.1008 and support at 1.0903 and 1.0828. The RSI is around 55, indicating neutral momentum.
In summary, EUR/USD is under pressure due to Dollar strength and global market sentiment. The possibility of a Fed rate cut in September could impact the currency pair in the short term, while long-term trends favor the US economy. Traders should monitor key support and resistance levels for potential trading opportunities.