EUR/USD Price Forecast: US Dollar up an Powell’s cautious words

EUR/USD Current price: 1.1743

• The German IFO Business Climate Index unexpectedly fell in September.
• Federal Reserve Chair Powell poured cold water on rate cut speculation.
• EUR/USD gains downward traction, lower lows likely in the near term.

The EUR/USD pair trades around 1.1750, with the US Dollar (USD) firmer across the FX board following Federal Reserve (Fed) Chair Jerome Powell's appearance at the Greater Providence Chamber of Commerce on Tuesday. Powell discussed the economic outlook and poured cold water on mounting speculation of steeper interest rate cuts.

Powell reiterated what he said in the press conference that followed the September monetary policy announcement, cautioning against moving too fast and risking an uptick in inflation. He also repeated that the job market is less dynamic and "somewhat softer." His words had no immediate impact on financial markets, but as the news kicked in, the USD found some relief.

Other than that, Germany published the IFO Business Climate Index, which unexpectedly fell to 87.7 in September from 89 in August. The figure also missed expectations of 89.3. The assessment of the current situation eased to 85.7 from the previous 86.4, while expectations shrank the most, as the index declined to 89.6 from the 91.6 posted in August. The dismal data undermined demand for the Euro (EUR), further pushing the pair lower.

The United States (US) calendar will be lighter on Wednesday. The country published MBA Mortgage Applications, which were up a modest 0.6% down from the 29.7% previously posted. Coming up next are New Home Sales and a speech from Fed’s Mary Daly.

EUR/USD short-term technical outlook

The EUR/USD pair trimmed most of its weekly gains, but remains within familiar levels. The case for a continued slide seems limited, as in the daily chart, EUR/USD holds just above a mildly bullish 20 Simple Moving Average (SMA). The 100 SMA, in the meantime, stands pat at around 1.1580, too far away to be relevant, but hinting at easing buying interest. Finally, technical indicators have turned south with moderated strength, but remain within positive levels, also hinting at contained selling interest.

In the near term, and according to the 4-hour chart, the risk skews to the downside. The EUR/USD pair accelerated its slide after piercing a mildly bullish 20 SMA and challenges a bullish 100 SMA at around 1.1740. Technical indicators turned sharply lower, with the Momentum holding just above its 100 line, but the Relative Strength Index (RSI) standing at 38.

Support levels: 1.1730 1.1690 1.1650

Resistance levels: 1.1775 1.1820 1.1855