• EUR/USD has retreated below 1.0500 in the early European session on Wednesday.
  • The risk-averse market environment helps the dollar outperform its rivals.
  • Investors wait for FOMC Chairman Jerome Powell to testify before Congress.

EUR/USD has lost its bullish momentum early Wednesday and retreated below 1.0500 before recovering modestly. The pair seems to have formed a consolidation channel in the 1.0560-1.0470 range and a break out of this area could trigger the next significant move.

Hawkish comments from European Central Bank (ECB) officials helped the shared currency find demand on Tuesday. With safe-haven flows returning to markets amid escalating recession fears on Wednesday, however, EUR/USD reversed its direction.

Bloomberg reported on Wednesday that economists at Citigroup now see a nearly 50% chance of a global recession. Reflecting the risk-averse market environment, US stock index futures are down between 1.6% and 2% in the early European session. 

Later in the day, FOMC Chairman Jerome Powell will testify before the US Senate Banking Committee. His prepared remarks are expected to be released before the event. As it currently stands, markets are pricing a more-than-90% probability of a 75 basis points (bps) rate hike in July. Hence, the dollar could lose interest if Powell reminds investors that they could opt for a 50 bps rate increase if they see signs of price pressures easing. On the other hand, the market positioning suggests that hawkish comments are not likely to have a significant impact on the dollar's valuation. Nevertheless, the greenback should be able to hold its ground unless risk flows start to dominate the markets.

During American trading hours, the European Commission will release the preliminary Consumer Confidence data for June. The market consensus points to a modest improvement and a disappointing print could hurt the euro and vice versa.

EUR/USD Technical Analysis

EUR/USD failed to make a four-hour close above 1.0560 on Tuesday, where the Fibonacci 50% retracement of the latest downtrend is located. This level now aligns as the upper limit of the short-term consolidation channel. 1.0600 (psychological level, Fibonacci 61.8% retracement of the latest downtrend, 100-period SMA) could be seen as the next hurdle before the pair could target 1.0660 (static level, former support).

On the flip side, a four-hour close below 1.0470 (Fibonacci 23.6% retracement) could attract sellers and open the door for an extended decline toward 1.0400 (psychological level) and 1.0380 (the end-point of the latest downtrend).

In the meantime, the Relative Strength Index (RSI) indicator on the four-hour chart is moving sideways near 50, highlighting the pair's indecisiveness.

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.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD continues to decline toward 1.0250 during the American trading hours on Friday. After the data published by the UOM showed that the long-run inflation outlook rose to 3% in August from 2.9% in July, the dollar gathered strength against its rivals, weighing on the pair.

EUR/USD News

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD is trading deep in negative territory near 1.2100 during the American session on Friday. With the UoM's Consumer Sentiment Survey pointing to a modest increase in the long-run inflation outlook, the US Dollar Index extended its rally, reflecting a broad dollar strength.

GBP/USD News

Gold clings to modest gains above $1,790

Gold clings to modest gains above $1,790

Gold stays relatively resilient on Friday and trades modestly higher on the day above $1,790. Although the greenback continues to outperform its rivals on the latest US data, falling US Treasury bond yields help XAU/USD hold in positive territory.

Gold News

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shytoshi Kusama, the project leader of Shiba Inu announced the launch of Shiba Eternity for Vietnamese players. The game is available for testing and the team has asked users for their review. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures