- EUR/USD has been rising after Fed Chair Powell opened the door to rate cuts.
- The second part of Powell's testimony, US inflation, and the ECB minutes are set to move prices today.
- Thursday's four-hour chart is showing favorable conditions for EUR/USD bulls.
"The outlook has dimmed" – said Jerome Powell, Chair of the Federal Reserve on Wednesday – and his dovish words continue reverberating and weighing heavily on the US dollar. EUR/USD has advanced to 1.1280.
It has been impossible to sugarcoat Powell's concerns that weak inflation may become persistent, a notable drop in investment, and his refusal to describe the job market as "hot." Investors have been fully convinced that the world's most powerful central bank is set to slash interest rates later this month – for the first time since 2008.
Later on, the Fed's meeting minutes from the June meeting have echoed the same message – by showing that several members are in favor of reducing interest rates. Powell will testify again today – this time before a Senate committee – and will likely repeat the same messages. His answers to politicians' questions may reveal more of the Fed's thinking.
Powell has mentioned subdued inflation and today's Consumer Price Index (CPI) report for June will provide a fresh update. Annual core CPI – which is the most significant figure – is forecast to remain at 2%. However, Powell's concerns about inflation may have lowered real expectations. The central bank often receives an advance copy of the data.
See US CPI Preview: Inflation is secondary
Today is the European Central Bank's turn to publish its meeting minutes from the rate decision in June. Back then, President Mario Draghi expressed concerns but his most dovish words came only afterward – in the ECB's conference in Sintra, Portugal.
The document may reveal more willingness to slash rates and perhaps resume the bond-buying program. If the minutes are gloomy, EUR/USD may reverse some of its gains.
Overall, central banks are set to dominate price action once again.
EUR/USD Technical Analysis
The technical picture for EUR/USD has significantly improved. The world's most popular currency has set a higher low at 1.1195 and has crossed above the 50 and 200 Simple Moving Averages on the four-hour chart. Moreover, momentum has turned positive and the Relative Strength Index is on the rise.
The 100 SMA at the round number of 1.1300 may serve as resistance but the more significant caps are higher. 1.1320 capped EUR/USD in early July, while 1.1350 served as support in late June. The next lines to watch are 1.1390 and .11410.
Some support awaits at 1.1270 which held up EUR/USD last week. It is followed by 1.1235 which held it down earlier this week and by the weekly low of 1.1195.
More Powell's Power Play: Fed's five dollar downers – EUR/USD levels to watch
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.
Recommended Content
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.