EUR/USD Forecast: Euro remains vulnerable after ECB dovish rate hike
- The ECB hikes interest rates and signals the end of the hiking cycle.
- The US Dollar holds firm, supported by US economic data.
- The EUR/USD resumes the downside, in line with the main trend.
The Euro tumbled across the board after the European Central Bank’s 25 basis points rate hike. Markets perceive it as the final hike. On the other side, US data surpassed expectations. The EUR/USD resumed its downtrend, breaking below 1.0650.
The ECB delivered a 25 basis point rate hike. Some analysts expected a pause, and as Lagarde mentioned, some members of the Governing Council also preferred that. However, the interest rate hike did not boost the Euro; instead, it fell sharply on expectations that it would be the last one.
ECB President Lagarde will speak again on Friday in Spain at the Eurogroup meeting. After the post-meeting press conference, there appears to be nothing left to say. Eurostat will release Q2 Labor Costs and Trade Balance. Also due is the German Wholesale Price Index.
The US Dollar strengthened during the American session after the release of US economic data that showed a larger-than-expected increase in the Producer Price Index in August, along with an upbeat retail sales report. US yields edged higher, supporting the Dollar, partially offset by risk appetite.
The EUR/USD broke key levels due to a combination of robust US data and the dovish ECB rate hike. The pair remains vulnerable, and a deterioration in market sentiment could open the doors to further losses.
EUR/USD short-term technical outlook
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The EUR/USD is vulnerable after breaking decisively below 1.0700, resuming the downtrend. The daily close below 1.0650 shows that the pair remains vulnerable to further losses as it looks for the following support that could emerge at 1.0625 and then 1.0595. A rally above 1.0830 would change the current outlook to neutral.
On the 4-hour chart, technical indicators show oversold readings, with the Relative Strength Index below 30. However, no signs of consolidation are yet visualized. The immediate resistance is at 1.0655, followed by 1.0680. If the pair manages to stabilize, it will likely be in a range between 1.0630 and 1.0655.
View Live Chart for the EUR/USD
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Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
