EUR/USD faced renewed downward pressure as the US Dollar made a sharp comeback, challenging the 1.1100 level. The Greenback regained balance despite mixed US yields and a drop in German bund yields. Investors are closely monitoring the possibility of a rate cut by the Federal Reserve in September, following Chair Jerome Powell’s remarks.
If the Fed opts for rate cuts, the policy gap between the Fed and the ECB may narrow, potentially boosting EUR/USD in the medium to long term. However, the US economy is expected to outperform Europe in the longer term, limiting prolonged weakness in the dollar.
Position sizing indicates bullish sentiment among speculators, with net long positions in the EUR rising to multi-week highs. Looking ahead, Germany’s economic data releases will be crucial for market sentiment, along with the Eurozone’s flash Inflation Rate.
EUR/USD Technical Outlook
The EUR/USD is expected to challenge its 2024 top of 1.1201, with downside targets at 1.0881 and 1.0851. The pair’s upward trend remains intact as long as it stays above the 200-day SMA. The four-hour chart shows a side-lined theme near the higher end of the range, with resistance at 1.1201 and 1.1275, and support at 1.1098 and 1.1035.
Overall, potential rate cuts by the Fed and the ECB could impact EUR/USD in the coming months, making it essential for investors to stay informed and adapt their investment strategies accordingly.