Euro/dollar maintains its position close to a seven-month peak, trading at 1.1077 on Tuesday. The US dollar’s weakening continues, largely driven by market expectations of an imminent interest rate cut by the US Federal Reserve next month. Attention is also geared towards Fed Chairman Jerome Powell’s upcoming remarks at the Jackson-Hole symposium on Friday.
Market participants anticipate Powell will signal the necessity for a rate reduction. The nuances of his speech will be critically evaluated to discern whether the Fed is leaning towards a moderate 25 basis point cut or a more substantial reduction in September.
While there’s a possibility Powell might opt for cautious language to provide the Fed with flexibility to adjust the pace of rate cuts based on future economic data, current conditions seem conducive for at least a 25bp reduction in borrowing costs next month. The Fed could then decide to accelerate cuts depending on subsequent economic indicators.
Until further data becomes available, the US dollar might remain under pressure. So far, EURUSD has appreciated by 2.4% since the start of August, marking the most robust monthly gain since November of the previous year.
Technical analysis of EUR/USD
The EUR/USD has established a consolidation pattern around 1.1020, breaking upwards to reach 1.1080. This growth trajectory appears to have peaked, and the market is now likely to form a consolidation range at these high levels. A downward breakout is anticipated, potentially driving the pair towards 1.0980. A breach of this level could extend losses to 1.0880. The MACD indicator supports this view, with its signal line positioned above zero but poised to decline, suggesting a potential reversal.
On the H1 chart, EUR/USD is currently forming a consolidation range near 1.1080, with a possible expansion to 1.1090. A downward departure from this range could target 1.1020. Following this, a corrective move to 1.1050 may occur before the pair resumes its descent to 1.0990 and potentially extends to 1.0950. This bearish outlook is corroborated by the Stochastic oscillator, which is near the 80 level and anticipated to drop towards 20, indicating a potential decline.
