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MENAFN- Daily Forex)
- Amid strong upward momentum supported by dollar weakness, the EUR/USD pair moved towards the psychological resistance level of 1.1000, their highest level in seven months.
- However, it did not sustain these gains and has since stabilized around the 1.0955 level at the time of writing.
- Its gains primarily benefited from the weakness of the US dollar, as investors reacted to disappointing US employment data that raised recession fears and expectations of significant interest rate cuts by the Federal Reserve.
Concerns about the US economy have increased expectations of US interest rate cuts by the Federal Reserve three times this year, instead of two. Additionally, traders expect at least two interest rate cuts by the European Central Bank this year, with the next cut expected in September.
For his part, Stournaras of the European Central Bank warned of potential inflation struggles in the eurozone due to economic challenges. Despite an unexpected increase in annual inflation to 2.6% in July, service inflation fell for the first time in three months. Also, preliminary estimates showed that the eurozone economy beat expectations with a 0.3% growth in the second quarter, led by France, Italy and Spain, while Germany faced an unexpected contraction is expected for the EUR/USD pair in the coming days?
The 1.0% advance in the euro/US dollar price last Friday sends a strong signal; the euro/US dollar exchange rate is in a bullish mood. We will have to go back to November 14, 2023, to see a bigger daily advance. Back then, the euro built on the impulsive move to record consecutive daily gains, and we wonder if the coming days will witness similar price movements.
According to reliable trading platforms, the euro/US dollar is trading above its 200-day moving average (DMA) again, and our forecast rules for this week say that this indicates that the exchange rate is in an uptrend. As such, any weakness is seen as a buying opportunity ahead of further advances. The rally could eventually test the 1.10 level and then the December 2023 high of 1.1139, but that peak will be a multi-week story. Furthermore, when EUR/USD last climbed to these heights, the talk was that the odds of a Fed rate cut were high: in December 2023, the market was expecting the first cut in March. Of course, that didn't happen, and the disappointment fueled a strong rally in the dollar through the first half of 2024. So far, if we fast forward to August, the scent of a Fed rate cut is really in the air.
This week, we will be on the lookout for any news from policymakers at the Federal Reserve that suggests the need to accelerate US interest rate cuts. Consequently, this would provide the impetus for further gains for the euro.
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According to the daily chart performance, the upward trend of the EUR/USD pair is ongoing. As mentioned earlier, selling from the top of its gains is the best trading strategy. Obviously, the selling above 1,000 psychological resistance is best. The path of the EUR/USD today will be influenced by the outlook for future US economic recession signals from global central bank officials. On the other hand, and according to the daily chart performance, the 1.0820 support level will remain important for bears to regain control of the trend.
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