As the Dollar strengthens and the Euro weakens, EUR/USD has retreated to new two-week lows near 1.1030. The US ISM Manufacturing PMI rose to 47.2 in August, adding to the pressure on the Euro. But what does this mean for your investments?
Investors are closely watching for clues on the expected size of the Fed’s interest rate cut in September, as the upcoming US Nonfarm Payrolls report could determine the extent of the cut. The likelihood of a 25 bps rate cut in September is around 63%, according to the CME Group’s FedWatch Tool.
On the other hand, the ECB is considering another rate cut at its meeting on September 12, following lower-than-expected flash CPI data for August in Germany and the broader Eurozone. ECB policymakers are divided over the growth outlook, which could influence rate cut discussions in the months ahead.
Speculators have increased their net long positions in the Euro to levels not seen since January, while commercial players have raised their net short positions to multi-month highs. This shift in positioning could signal a potential change in the EUR/USD trend.
Overall, if the Fed continues with rate cuts and the ECB follows suit, the policy gap between the two central banks could narrow, potentially benefiting EUR/USD in the medium to long term. However, the long-term outlook suggests that the US economy may outperform Europe’s, limiting sustained weakness in the dollar.
For now, the EUR/USD is likely to test its 2024 top of 1.1201 before potentially dropping to the 55-day SMA at 1.0903. The pair’s upward trend is expected to continue as long as it remains above the key 200-day SMA.
So, what does all this mean for your investments? Pay attention to the upcoming US economic data releases and ECB meetings to gauge the potential impact on the EUR/USD pair. Consider adjusting your portfolio to reflect the changing dynamics in the Forex market for optimal investment returns.
EUR/USD Daily Chart
EUR/USD Short-Term Technical Outlook
Keep an eye on key levels such as 1.1033, 1.1030, and the 200-SMA at 1.0973 for potential support as the Euro continues to face downward pressure. On the upside, watch for resistance levels at 1.1114 and 1.1201 as the pair attempts to break higher.