- 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).
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.