The EUR/USD pair surged to new heights near 1.1170, targeting the 1.1200 level, as the Dollar continued to slide, hitting year-to-date lows below 101.00. The recent release of the FOMC Minutes suggests a potential rate cut next month, further fueling the Euro’s bullish momentum.
Market sentiment turned in favor of the Euro as the Dollar Index (DXY) plummeted below key support levels, driven by the dovish outlook from the Federal Reserve. Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium is anticipated to reinforce expectations of monetary easing, pushing the Dollar even lower.
While the possibility of a half-point rate cut by the Fed has diminished, a 25 bps reduction in September is now more likely according to the CME Group’s FedWatch Tool. This shift in expectations is supported by positive economic data but overshadowed by concerns of global economic slowdown.
On the other side, the European Central Bank (ECB) is also leaning towards monetary easing as inflation remains subdued and growth falters. The policy divergence between the Fed and ECB could narrow if the Fed implements further rate cuts, potentially driving the EUR/USD pair higher in the short term.
Despite the current bullish trend for the Euro, the long-term outlook favors the US economy, suggesting that any weakness in the Dollar may be temporary. Key events to watch in the coming days include the release of flash PMIs, Powell’s speech, and Bank of Japan Governor’s testimony.
EUR/USD Technical Analysis
The EUR/USD pair is expected to test resistance levels at 1.1173, 1.1200, and 1.1275, while support levels lie at 1.1005, 1.0949, and 1.0881. The pair’s upward trend remains intact as long as it stays above the 200-day SMA.
Overall, the EUR/USD pair is poised for further gains in the short term, with resistance at 1.1173 and support at 1.1005. The RSI indicates a strong bullish bias, pointing towards a potential breakout above 1.1200.