- EUR/USD drops to a two-month low and seems poised to register losses for the sixth straight week.
- A break below the very important 200-day SMA supports prospects for a further depreciating move.
- The RSI is on the verge of breaking into oversold territory and warrants caution for bearish traders.
- The focus remains on Fed Chair Jerome Powell and ECB President Christine Lagarde's speech.
The EUR/USD pair remains under some selling pressure for the second successive day on Friday and drops to its lowest level since June 14 during the Asian session. Spot prices currently trade around the 1.0785-1.0780 region, down 0.25% for the day, and seem poised to end in the red for the sixth straight week.
The overnight hawkish remarks by Federal Reserve (Fed) officials keep the door open for one more 25 bps lift-off by the end of this year and lift the US Dollar (USD) to a more than two-month high. Apart from this, speculations that the European Central Bank (ECB) will halt its streak of nine consecutive rate hikes in September undermine the shared currency and contribute to the offered tone surrounding the EUR/USD pair.
From a technical perspective, the downward trajectory drags spot prices below the very important 200-day Simple Moving Average (SMA) for the first time since November 2022. This could be seen as a fresh trigger for bearish traders and supports prospects for an extension of the EUR/USD pair's over a one-month-old descending trend from a nearly 17-month peak, around the 1.1275 area touched on July 18.
That said, the Relative Strength Index (RSI) is on the verge of breaking into oversold territory. This, in turn, warrants caution ahead of Fed Chair Jerome Powell's speech on Friday and ECB President Christine Lagarde's statement on Saturday, at the Jackson Hole Symposium. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the EUR/USD pair is to the downside.
Furthermore, a convincing break and acceptance below a technically significant 200-day SMA add credence to the negative outlook. Hence, a subsequent fall towards the next relevant support near the 1.0750-1.0745 region, en route to the 1.0700 round-figure mark, looks like a distinct possibility. Some follow-through selling might then expose the May 2023 swing low, around the 1.0635 region.
On the flip side, any intraday recovery back above the 1.0800 round-figure mark might now be seen as a selling opportunity and remain capped near the 1.0840 region. This is followed by the 1.0870-1.0875 supply zone, which if cleared decisively might negate the bearish outlook. The EUR/USD pair might then aim to surpass the 1.0900 round-figure mark and test the 1.0915-1.0920 resistance zone.
EUR/USD daily chart
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Technical levels to watch
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