- EUR/USD dropped to multi-day lows near 1.0840.
- The Dollar regained upside traction despite lower yields.
- The ECB's de Guindos opened the door to a rate cut in September.
The US Dollar (USD) edged modestly higher on turnaround Tuesday, lifting the USD Index (DXY) to the mid-104.00s in spite of a corrective decline in US and German yields.
That said, EUR/USD resumed its downtrend, quickly leaving behind Monday’s small gains and instead exposing further losses well south of the 1.0900 barrier in a context of dominant risk-off sentiment.
Around the Fed, a September interest rate cut appears fully anticipated, with investors also expecting another reduction in December. Against that, market participants could now start shifting their attention to the US political arena, particularly after current Vice President K. Harris gathers more than enough support to face Republican candidate D. Trump at the November 5 elections.
Closer to home, the ECB’s Vice President Luis de Guindos suggested a possible interest rate cut in September, noting that the ECB's new projections would be the "most important" factor in determining whether inflation is returning to target.
Furthermore, the Eurozone's economic recovery prospects and signs of cooling in key US economic indicators may lessen the current monetary policy gap between the Fed and the ECB, occasionally supporting EUR/USD. This view has gained support amid increasing expectations of Fed rate cuts.
Looking ahead, key US GDP figures, advanced PMIs globally, and US PCE data are expected to shape market sentiment in the coming days.
EUR/USD daily chart
EUR/USD short-term technical outlook
EUR/USD is expected to face the next downward stop at the key 200-day SMA of 1.0815 before sliding to its June low of 1.0666 (June 26). The loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).
On the other hand, the initial up-barrier emerges at the July top of 1.0948 (July 17), followed by the March peak of 1.0981 (March 8) and the key 1.1000 milestone.
Looking at the larger picture, the constructive bias should remain in play if the pair maintains its position above the critical 200-day SMA.
So far, the four-hour chart shows that the downtrend has picked up pace. That said, the initial resistance is 1.0948, which precedes 1.0981 and 1.1000. On the opposite side, 1.0843 comes first, seconded by the 200-SMA at 1.0793 and lastly 1.0709. The relative strength index (RSI) dropped to about 33.
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
Editors’ Picks
AUD/USD: Further retracement targets the 200-day SMA
The downward bias in AUD/USD remained unabated for yet another session on Tuesday, dragging spot to five-week lows and approaching the key 0.6600 neighbourhood.
EUR/USD remains vulnerable to extra pullbacks
EUR/USD retreated to multi-day lows and revisited the 1.0840 region on the back of the resumption of the buying interest in the greenback and ahead of key data releases due later in the week.
Gold reconquers $2,400, lacks directional momentum
Gold stages a rebound and trades above $2,400 on Tuesday after closing the fourth consecutive trading day in negative territory on Monday. The pullback seen in US Treasury bond yields help XAU/USD cling to modest daily gains despite the US Dollar's resilience.
Ripple stablecoin unlikely to invite legal trouble with SEC, XRP loses key support
Ripple (XRP), the native token of the XRP Ledger slipped under $0.60, a key psychological support for the altcoin. The two key market movers are the Securities & Exchange Commission’s (SEC) lawsuit against Ripple and the upcoming stablecoin RealUSD (RLUSD).
US S&P Global PMIs Preview: Economic expansion could struggle in July Premium
On Wednesday, S&P Global will release advanced readings for the United States (US) Purchasing Managers Indexes (PMIs) for July, a monthly survey of business activity. The survey is anticipated to indicate that US economic activity in the private sector faced mixed trends during the current month.