EUR/USD Tumbles Amid US Dollar Strength and Central Bank Policies
The EUR/USD pair faced significant downward pressure, dropping to around 1.0500 as the US Dollar gained strength and geopolitical concerns eased. Here’s a breakdown of the key factors influencing this currency pair:
US Dollar Strength:
- The US Dollar picked up momentum, driven by the “Trump trade” and easing geopolitical concerns.
- The US Dollar Index (DXY) surged, approaching the crucial 107.00 level.
- Global bond yields rose, reflecting improved sentiment and contributing to the Dollar’s strength.
Federal Reserve Policy:
- The Fed cut interest rates by 25 basis points, aiming to reach its 2% inflation target.
- Fed Chair Jerome Powell signaled a cautious approach to further rate cuts, boosting the Dollar.
- Concerns about strain in the labor market emerged despite low unemployment rates.
European Central Bank (ECB) Stance:
- The ECB paused rate adjustments after a recent cut, awaiting more economic data.
- Negotiated wage growth in the euro area increased, indicating persistent inflationary pressures.
With potential policy changes and inflationary pressures looming, the EUR/USD pair faces ongoing challenges. The technical outlook suggests further downside potential:
Technical Analysis for EUR/USD
- The pair may target the 2024 bottom of 1.0495, followed by the 2023 low of 1.0448.
- Immediate resistance lies at the 200-day SMA at 1.0861, with further hurdles at 1.0911 and 1.0936.
- Short-term technical indicators point to a bearish trend as long as EUR/USD remains below the 200-day SMA.
Overall, the EUR/USD pair is under pressure due to Dollar strength and cautious central bank policies. Investors should monitor key levels and developments for potential trading opportunities.