- EUR/USD dropped to fresh lows near 1.0780 on Thursday.
- The Dollar regained extra pace on the back of rising risk aversion.
- Reignited slowdown jitters lent support to the Greenback.
EUR/USD posted notable losses on Thursday, reversing post-FOMC gains amidst a stronger US Dollar (USD) in a context where risk aversion prevailed.
That said, the USD Index (DXY) managed to regain balance and advance to the 104.40 zone on the back of the broad-based sell-off in the risk-linked galaxy, which gathered extra steam on the back of slowdown fears in the US economy.
The rebound in the Dollar picked up pace and left behind part of the post-Fed weakness after the central bank kept interest rates unchanged and noted that inflation remained "somewhat" excessive, reiterating that it would not reduce rates until there is more certainty that inflation is moving steadily towards 2%.
In addition, Chief Powell mentioned that the FOMC is moving closer to a potential rate cut, possibly in September. He added that if inflation continues to decrease, economic growth remains strong, and the labour market remains stable, a rate cut could be considered.
The policy divergence between the Fed and the ECB is likely to persist, with both expected to cut rates soon. However, fresh weakness in US fundamentals flagged risks to the view of a soft landing, in line with some loss of momentum in the Eurozone's recovery, all opening the door to a probable stronger Dollar and further retracements in EUR/USD.
On the US docket, the ISM Manufacturing PMI eased to 46.8 in July, while weekly Initial Jobless Claims increased more than expected by 249K in the week to July 27.
Adding to the view of the loss of momentum in activity in the euro area, the final HCOB Manufacturing PMI in Germany and the euro bloc remained well below the 50 threshold that separates expansion and contraction.
EUR/USD daily chart
EUR/USD short-term technical outlook
On the downside, EUR/USD's next target is the weekly low of 1.0777 (August 1), ahead of the June low of 1.0666 (June 26), and the May bottom of 1.0649 (May 1).
On the upside, the first hurdle is the July top of 1.0948 (July 17), followed by the March peak of 1.0981 (March 8) and the crucial 1.1000 yardstick.
Looking at the big picture, the pair's bearish bias should remain in place if it stays below the crucial 200-day SMA (1.0823).
So far, the four-hour figure indicates fresh weakness. Against that, initial support comes at 1.0777 seconded by 1.0709. On the upside, the 200-SMA is at 1.0806 ahead of the 55-SMA at 1.0842 and 1.0849. The relative strength index (RSI) returned to about 39.
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: Prospects for extra retracements remain in place
AUD/USD broke below the 0.6500 support on the back of the strong rebound in the Greenback, widening the gap vs. the key 200-day SMA and exposing extra losses in the short-term horizon.
EUR/USD faces a deeper pullback near term
The firm tone in the US Dollar and persistent risk aversion sent EUR/USD to four-week lows in the sub-1.0800 region ahead of the key release of the US labour market on Friday.
Gold consolidates gains around $2,450
After falling to $2,430 earlier in the day, Gold regains its traction and trades at around $2,450 in the American session. The benchmark 10-year US Treasury bond yield is down more than 1% on the day below 4% after weak US data, allowing XAU/USD to hold its ground.
Ripple announces arrival of tokenized US Treasury bills on XRP Ledger, traders fearful as SEC cancels meeting
Ripple (XRP) informed market participants of the arrival of tokenized US Treasury bills on the XRP Ledger through an official tweet on X. The announcement marks the firm’s strategic move at a time when XRP traders experience the uncertainty of the Securities & Exchange Commission (SEC) lawsuit.
Bank of England joins central bank rate cut club
The Bank of England (BoE) joined the growing group of G10 central banks that have eased monetary policy, by delivering an initial 25 bps policy rate cut to 5.00% at today's monetary policy announcement.