After a series of losses, EUR/USD sees a positive uptick as it hits 1.1080 amidst a fluctuating US Dollar trend during the Labor Day holiday. The pair finds support around 1.1050, near the 61.8% Fibo retracement level from August’s rally.
The Dollar Index (DXY) remains on the back foot due to thin trading conditions caused by the holiday. Additionally, German 10-year bund yields are on the rise, impacting the pair’s movement.
Investors are keeping a close eye on the Fed’s potential interest rate cut in September, with a 68% probability according to CME Group’s FedWatch Tool. Meanwhile, the ECB is considering a rate cut in light of slowing economic growth and persistent inflation pressures.
ECB board member Isabel Schnabel argues for prioritizing inflation concerns over growth, while speculators and commercial players are taking opposite positions on the Euro.
EUR/USD Technical Outlook
In the short term, EUR/USD could challenge its 2024 high of 1.1201, followed by 1.1275 and 1.1300. On the downside, support levels include the 55-day SMA at 1.0898, the 200-day SMA at 1.0853, and various lows from previous months.
The pair’s bullish trend is expected to continue above the 200-day SMA, with resistance at 1.1201 and 1.1275. Support levels are at 1.1040, 1.1030, and the 200-SMA at 1.0969.
Overall, the future movements of EUR/USD could be influenced by the Fed’s rate cuts and ECB’s policy decisions, potentially narrowing the policy gap between the two central banks.