EUR/USD Forecast: Bulls challenging YTD highs ahead of FOMC Minutes

EUR/USD Current price: 1.1126

• The Federal Open Market Committee will release the Minutes of the July meeting.
• Financial markets turned cautious, but the US Dollar maintains its weak tone.
• EUR/USD is technically overbought but has room to extend its gains.

The EUR/USD pair keeps advancing on Wednesday,  flirting with the December 2023 high at 1.1138 ahead of Wall Street’s opening. The US Dollar remains pressured despite a worsening market mood, as interest revolves around the September Federal Reserve (Fed) monetary policy meeting and whatever can influence policymakers’ decisions then.

Financial markets are “convinced” the Fed will trim interest rates when it meets next month, although it’s still unsure about the extension of such a cut. Most investors are betting for a 25 basis points (bps) trim, while the odds for a 50 bps cut stand at around 35%, according to the CME FedWatch Tool. As a result, US indexes rallied with optimism and stood near record highs while speculative interest abandoned the USD.

Markets turned cautious ahead of the Federal Open Market Committee (FOMC) meeting Minutes. The document will be released in the American afternoon but will likely have a limited impact on financial markets, given that the latest comments from Fed officials reinforced the idea of a September rate cut dropped by Fed’s Chairman Jerome Powell when the meeting took place.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it trades around its daily opening, with technical indicators still heading higher within overbought levels. The Relative Strength Index (RSI) indicator, however, has partially lost its bullish strength, reflecting the ongoing corrective slide and still far from suggesting a downward correction. At the same time, the 20 Simple Moving Average (SMA) turned north almost vertically, reflecting buyers’ strength, but is now too far below the current level to become relevant.

In the near term, and according to the 4-hour chart, the risk is also skewed to the upside. Technical indicators have retreated from their recent highs but are far from suggesting an upcoming decline, as the Momentum indicator consolidates well above its 100 level while the RSI indicator aims marginally higher at around 76. Furthermore, all moving averages turned sharply bullish below the current level, which aligns with the dominant bullish trend.

Support levels: 1.1050 1.1020 1.0985  

Resistance levels: 1.1090 1.1120 1.1160