EUR/USD Soars Above 1.1100 Amidst US Dollar Weakness
The EUR/USD pair has seen a significant uptrend, surpassing the key resistance level of 1.1100, driven by various factors affecting the US Dollar and the Euro. Let’s delve into the details of what’s been happening in the markets:
Factors Driving EUR/USD Movement
- Speculation of a 50 bps Rate Cut by the Fed: The US Dollar has been under pressure due to increasing expectations of a larger interest rate cut by the Federal Reserve. The probability of a 50 bps rate reduction has risen to around 60% according to the CME Group’s FedWatch Tool.
- Improved Risk Sentiment: The Greenback has also been influenced by improved risk sentiment in the market, leading to a decline in the US Dollar Index (DXY).
- ECB’s Monetary Policy Decisions: Statements from European Central Bank (ECB) policymakers, including Vice President Luis De Guindos and Chief Economist Philip Lane, have provided support to the Euro. The ECB’s decision to ease monetary policy last week was based on its assessment of inflation outlook and economic dynamics.
Future Outlook for EUR/USD
Looking ahead, if the Federal Reserve continues to implement rate cuts, the policy divergence between the Fed and the ECB could narrow over time, potentially supporting EUR/USD. However, the US economy is expected to outperform the European economy in the long term, which could limit prolonged weakness in the US Dollar.
Speculators have adjusted their positions in the Euro, with net long positions decreasing to three-week lows. Commercial traders have also reduced their net short positions amidst a marginal increase in open interest.
EUR/USD Technical Analysis
From a technical perspective, EUR/USD faces resistance levels at 1.1155, 1.1201, and 1.1275, with support levels at 1.1001, 1.0962, and 1.0881. The pair’s upward trend is expected to continue as long as it remains above the key 200-day SMA.
On the four-hour chart, there is a positive sentiment with resistance levels at 1.1137, 1.1155, and 1.1190, and support levels at 1.1071, 1.1030, and 1.1001. The relative strength index (RSI) is around 67, indicating a bullish momentum.
Overall, the EUR/USD pair’s movement is influenced by a combination of macroeconomic factors, central bank policies, and market sentiment, creating opportunities for traders and investors to capitalize on the volatility in the currency pair.