• EUR/USD came under pressure and challenged 1.0900.
  • The Dollar regained traction and weighed on the risk complex.
  • Germany’s Factory Orders expanded more than expected in June.

EUR/USD came under renewed selling pressure and set aside two straight days of gains on Tuesday, all against the backdrop of the resurgence of some upside traction in the greenback as well as a generalized better tone in the stock markets worldwide.

On the USD side of the equation, the USD Index (DXY) reclaimed the 103.00 barrier and beyond after Monday’s steep retracement to the 102.00 neighbourhood, helped by renewed selling in the Japanese yen as well as a decent rebound in US yields across the spectrum.

Contributing to the better mood around the Greenback, some Fed officials (A. Goolsbee and M. Daly) somehow suggested that markets could have exaggerated the recent results from the US labour market, therefore ruling out a US recession, although they were leaning towards rate reductions to avoid such a scenario.

In the German money market, 10-year bund yields added to Monday’s small recovery and surpassed the 2.20% level, in tandem with the rest of their global peers.

Also adding to the Dollar’s momentum, the likelihood of an emergency rate cut by the Fed has dissipated, although markets now see an increased probability of a 50 bps rate cut in September.

According to CME Group’s FedWatch Tool, there is a nearly 64% chance of that scenario materializing at the September 18 meeting, while around 36% gyrates around a quarter-point rate reduction.

If the Fed implements more substantial rate cuts, the policy divergence between the Fed and the ECB carries the potential to narrow in the medium-term horizon, which should be supportive of further gains in EUR/USD.

A glimpse at the longer run, however, sees the US economy outperforming its European counterpart, a prospect pointing to only transitory weakness in the Greenback.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further north, EUR/USD faces the August high of 1.1008 (August 5), followed by the December 2023 top of 1.1139 (December 28).

On the downside, the pair's next target is the 200-day SMA at 1.0828, ahead of the weekly low of 1.0777 (August 1) and the June low of 1.0666 (June 26), all of which came before the May bottom of 1.0649 (May 1).

Looking at the big picture, the pair's positive bias should remain in place if it stays above the key 200-day SMA on a sustainable fashion.

So far, the four-hour chart indicates some loss of upside momentum. The initial resistance is at 1.1008, prior to 1.1139. On the other hand, first support is at the 200-SMA of 1.0822 ahead of 1.0777, and 1.0709. The relative strength index (RSI) settled around 58.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

Australian Dollar extends gains despite  mixed PMI

Australian Dollar extends gains despite mixed PMI

The Australian Dollar (AUD) continues to strengthen against the US Dollar (USD) following the release of mixed Judo Bank Purchasing Managers' Index (PMI) data from Australia on Friday. The AUD also benefits from a hawkish outlook by the Reserve Bank of Australia (RBA) regarding future interest rate decisions. 

AUD/USD News
Japanese Yen fails to build on stronger CPI-led intraday uptick against USD

Japanese Yen fails to build on stronger CPI-led intraday uptick against USD

The Japanese Yen (JPY) attracted some follow-through buying for the second successive day following the release of slightly higher-than-expected consumer inflation figures from Japan. This comes on top of Thursday's hawkish remarks from BoJ Governor Kazuo Ueda, which keeps expectations for a December interest rate hike in play.

USD/JPY News
Gold price advances to near two-week top on geopolitical risks

Gold price advances to near two-week top on geopolitical risks

Gold price touched nearly a two-week high during the Asian session as the worsening Russia-Ukraine conflict benefited traditional safe-haven assets. The weekly uptrend seems unaffected by bets for less aggressive Fed policy easing, sustained USD buying and the prevalent risk-on environment

Gold News
Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally

Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally

Ethereum (ETH) is trading near $3,350, experiencing an 10% increase on Thursday. This price surge is attributed to strong bullish sentiment among derivatives traders, driving its open interest above $20 billion for the first time. 

Read more
A new horizon: The economic outlook in a new leadership and policy era

A new horizon: The economic outlook in a new leadership and policy era

The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures