• EUR/USD has gone into a consolidation phase following Thursday's steep drop.
  • The dollar stays resilient against its rivals as markets remain risk-averse.
  • The near-term technical outlook points to oversold conditions.

EUR/USD has gone into a consolidation phase below 1.0100 early Friday after having suffered heavy losses on Thursday. Although the short-term technical outlook points to oversold conditions, the pair could find it difficult to attract buyers unless it manages to reclaim 1.0100.

Following the mixed macroeconomic data releases from the US on Thursday, the US Dollar Index struggled to make a decisive move in either direction. Hawkish Fed commentary, however, provided a boost to the greenback and caused EUR/USD to turn south.

"The markets have a lack of understanding but consumers understand that rates won't go down right after they go up," San Francisco Fed President Mary Daly told CNN and refrained from pushing back against a 75 basis points rate hike in September. Meanwhile, St. Louis Fed President James Bullard argued that the Fed should continue to frontload rate increases with another large hike at the upcoming meeting.

The US Dollar Index, which tracks the dollar's performance against a basket of six major currencies, is up nearly 2% this week and was last seen trading at its highest level in a month at 107.70.

Meanwhile, US stock index futures are down between 0.5% and 1%. In case Wall Street's main indexes open deep in negative territory, the dollar could capitalize on safe-haven flows and continue to outperform its rivals in the absence of high-tier data releases.

EUR/USD Technical Outlook

EUR/USD was last seen trading slightly below 1.0100 (psychological level, static level). The Relative Strength Index (RSI) indicator on the four-hour chart stays below early Friday. When the RSI fell below 30 earlier in the week, EUR/USD staged an 80-pip recovery. In order for the pair to stage an upward correction, however, it needs to make a four-hour close above 1.0100. If that happens, 1.0150 (Fibonacci 23.6% retracement of the latest downtrend) and 1.0180 (200-period SMA on the four-hour chart) could be seen as the next recovery targets. 

On the downside, 1.0050 (static level) aligns as next support ahead of 1.0000 (psychological level) and 0.9950 (July 14 low).

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