- EUR/USD picked up pace and retested 1.0730 on Monday.
- The US Dollar sold off following Japan’s FX intervention.
- Germany’s flash CPI disappointed expectations in April.
The resurfacing downward pressure on the US Dollar (USD) on Monday triggered a marked response in EUR/USD, pushing the ongoing recovery to the 1.0730 area.
The Dollar's decline exclusively ensued after Japanese authorities of the MoF triggered a suspicious intervention in the FX markets soon after the Japanese currency depreciated to multi-decade lows vs. the Greenback early in the Asian trading hours.
Despite that event, the ongoing weakness in the US Dollar is expected to remain transitory on the back of delayed expectations of a potential interest rate cut by the Federal Reserve (Fed) later in the year.
On this, the FedWatch Tool tracked by CME Group sees the probability of a 25 bps interest rate cut at the September 18 meeting at nearly 45%, barely changed from a week ago.
The renewed weakness in the Greenback coincided with further consolidation in US yields across various time frames and a move lower in German 10-year bund yields, all amidst ongoing discussions highlighting the divergence in monetary policies between the Fed and other G10 central banks, especially the European Central Bank (ECB).
Recent statements from ECB board members have hinted at the ECB beginning its easing cycle in June, fueling speculation about three interest rate cuts (or 75 bps) for the remainder of the year. Against this backdrop, advanced inflation figures in Germany saw the CPI rise 2.2% over the last twelve months in April, missing consensus and matching the previous month's print.
Looking forward, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, strengthen expectations for a stronger Dollar in the medium term, especially considering the increasing possibility of the ECB cutting rates before the Fed.
In this scenario, EUR/USD is expected to experience a more pronounced decline in the medium term.
EUR/USD daily chart
EUR/USD short-term technical outlook
On the upside, EUR/USD is likely to encounter first resistance at the important 200-day SMA of 1.0803, seconded by the April peak of 1.0885 (April 9), the March high of 1.0981 (March 8), and the weekly top of 1.0998 (January 11), all before hitting the psychological barrier of 1.1000.
Looking south, a break of the 2024 low of 1.0601 (April 16) might signal a return to the November 2023 low of 1.0516 (November 1), which precedes the weekly low of 1.0495 (October 13, 2023). Once this area is reached, a visit to the 2023 bottom of 1.0448 (October 3) may take place before the round milestone of 1.0400.
The 4-hour chart shows some consolidative mood for the time being. The initial up-barrier is at 1.0752, prior to the 200-SMA at 1.0775. Meanwhile, the 55-SMA at 1.0679 provides early support ahead of 1.0601 and 1.0516. The Relative Strength Index (RSI) eased below 56.
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
AUD/USD retreats from four-month highs after higher Unemployment Rate
The AUD/USD snapped its three-day winning streak, trading around 0.6680 after the higher-than-expected Aussie Unemployment Rate on Thursday, which rose to 4.1% in April from the previous reading of 3.9%.
USD/JPY trims losses below 154.50 following Japan’s GDP data
USD/JPY trims losses near 154.45 during the Asian session on Thursday. The softer US CPI inflation data has exerted some selling pressure on the US Dollar. However, the major pair recovers modestly following the recent weaker-than-expected Japan’s Gross Domestic Product in the first quarter of 2024.
Gold price jumps as US CPI inflation fuels Fed rate cuts
Gold price gains traction amid the weaker US Dollar on Thursday. The recent Consumer Price Index report showed inflation in the US slowed in April, prompting market players to increase their bets on the US Federal Reserve rate cuts this year.
DOGE’s 15% upside potential hinges on Bitcoin holding above $65K
Dogecoin price is trading with a bullish bias, leading meme coins north as sector bulls resurface. This show of hand comes after Bitcoin price broke past the $65,000 threshold and could extend if the pioneer cryptocurrency holds above this level.
Dow Jones Industrial Average soars 350 points, sets new all-time high as rate cut hopes surge
The Dow Jones Industrial Average clipped into a fresh all-time high on Wednesday, gaining almost nine-tenths of a percent during the US market session after US Consumer Price Index inflation slipped further back.