EUR/USD Surges Above 1.1100 as US Dollar Weakens: What to Expect Next
The EUR/USD pair continued its upward momentum on Thursday, surpassing the 1.1100 mark as the US Dollar faced pressure from a weakening US labour market. The US Dollar Index (DXY) dropped below 101.00 support, hitting new five-day lows after disappointing job additions in August, fueling speculation of a potential half-point rate cut by the Fed.
Investors are now closely monitoring the Fed’s upcoming rate cut decision, especially after hints from Fed Chair Jerome Powell at the Jackson Hole Symposium. The upcoming US Nonfarm Payrolls (NFP) report will play a crucial role in determining the size of the expected rate cut.
On the other hand, the European Central Bank (ECB) has shown no immediate plans to cut rates, but recent reports suggest growing divisions among policymakers regarding economic growth outlook and potential recession risks.
If the Fed proceeds with more rate cuts, it could narrow the policy gap between the Fed and the ECB, benefiting EUR/USD. However, the long-term outlook favors the US economy, potentially limiting prolonged weakness in the dollar.
In the short term, EUR/USD is expected to test key resistance levels at 1.1201 and 1.1275, while support levels lie at 1.1026 and 1.0855. The pair’s upward trend is likely to continue above the key 200-day SMA.
In conclusion, the ongoing developments in the US and Eurozone economies will impact the future of EUR/USD trading, with potential opportunities for investors to capitalize on the changing market conditions.
EUR/USD short-term technical outlook:
- Resistance levels: 1.1119, 1.1139, 1.1190
- Support levels: 1.1026, 1.0984, 1.0949
- RSI: 62
Stay informed and keep an eye on upcoming economic data and central bank decisions to make informed investment decisions in the EUR/USD market.