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EUR/USD Forecast: Further up comes 1.1000

  • EUR/USD met some selling pressure around 1.0920.
  • The US Dollar showed some signs of life on Monday.
  • Next on tap are US Retail Sales, and the ECB event.

The US Dollar (USD) regained some composure in a mildly optimistic start to the week, pushing the USD Index (DXY) to the low-104.00s against the backdrop of a generalized knee-jerk in the risk-linked universe.

The modest advance in the Greenback dragged EUR/USD back below 1.0900 soon after spot hit new monthly peaks around 1.0920, all amidst marginal moves in the US and German money markets.

In the meantime, there was no news from Chief Powell, after he argued that he does not anticipate major economic turbulence or recession in the US economy, stating that a hard landing scenario is not the most likely. He also noted that progress is being made towards bringing price increases back to the Fed's target.

Meanwhile, the CME Group's FedWatch Tool fully priced in lower rates at the September 18 meeting.

Meanwhile, the macroeconomic landscape remained stable on both sides of the Atlantic. Consensus among investors expects the European Central Bank (ECB) to maintain its policy rate unchanged at its July 18 gathering, although markets continued to see two additional cuts by year-end.

On the other hand, investors continue to debate whether the Fed will implement one or two (or three) rate cuts this year, despite the Fed's current projection of a single cut, likely in December.

The ECB's rate cut in June, along with the Fed's decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term. However, economic recovery prospects in the Eurozone, combined with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, US Retail Sales could shed extra light on the Fed’s plans to reduce its interest rates, while the Economic Sentiment in Germany and the euro area are expected to take centre stage on the domestic calendar on Tuesday.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is likely to reach the next upward hurdle at the July top of 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears gain control, spot might approach the 200-day SMA at 1.0805 before falling to a low of 1.0666 on June 26. From here, the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the big picture, it appears that further gains are on the way if the key 200-day SMA is consistently surpassed.

So far, the 4-hour chart shows an increase in the positive momentum. The initial resistance level is 1.0922, ahead of 1.0981. On the flip side, the 55-SMA at 1.0832 is first, followed by the 200-SMA at 1.0786 and, finally, 1.0709. The relative strength index (RSI) has fallen below 66.

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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