EUR/USD Forecast: Dollar Under Pressure as Markets Await Fed Rate Cut

  • US Dollar remains under selling pressure as market sentiment remains positive.
  • Stable macroeconomic data and expectations of a rate cut support financial markets.
  • EUR/USD technically overbought but potential for further gains in the short term.

The EUR/USD pair continues to climb, hitting new highs in 2024 and approaching the 1.1100 level during European trading. The optimistic market sentiment and anticipation of a September rate cut by the Federal Reserve are weighing on the US Dollar. Global equities are on the rise, with Asian and European indexes recording significant gains, reflecting the positive mood.

In economic news, Germany’s Producer Price Index (PPI) for July increased by 0.2% month-on-month and decreased by 0.8% year-on-year, in line with expectations. The Eurozone’s Harmonized Index of Consumer Prices (HICP) rose by 2.9% year-on-year in July. The EU reported a seasonally adjusted surplus of €51 billion in the June Current Account. However, these figures had little impact on the Euro.

In the US session, no major data releases are expected, but comments from Fed members could hint at a September rate cut, potentially leading to further weakness in the USD.

EUR/USD Technical Analysis

Technically, the bullish momentum in EUR/USD is likely to continue. The daily chart shows the pair trading above all its moving averages, with the 20 SMA trending higher well below the current price level. Technical indicators suggest overbought conditions but show no signs of a reversal yet.

On the 4-hour chart, bulls are in control for the near term. The RSI indicator is slightly higher around 75, while the Momentum indicator is consolidating as the pair remains below its intraday high. Moving averages are bullish and supportive of continued buying pressure.

Support Levels: 1.1050, 1.1020, 1.0985

Resistance Levels: 1.1090, 1.1120, 1.1160

Analysis: The EUR/USD pair is expected to maintain its upward momentum as market sentiment remains positive and expectations of a Fed rate cut support risk appetite. Traders should monitor Fed members’ comments for clues on the timing of the rate cut, which could further weaken the US Dollar. Technical indicators suggest a bullish outlook, with support levels at 1.1050, 1.1020, and 1.0985, and resistance levels at 1.1090, 1.1120, and 1.1160. Overall, the current market conditions favor a continuation of the EUR/USD uptrend in the near term.
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