EUR/USD: Rally runs out of steam at 50-day MA ahead of Powell speech

The corrective rally in the EUR/USD failed to take out the 50-day moving average (MA) in the last two days as the Fed minutes signaled the interest rates will likely rise in September.
The pair may take out the 50-day MA hurdle if Fed's Powell talks down rate hike bets.

Omkar Godbole FXStreet Contributor

The EUR/USD is currently trading around 1.1550, having failed to take out the 50-day MA hurdle on Wednesday.

The common currency picked up a bid at the low of 1.1301 on Aug. 15 as the investors scaled back expectations of Fed rate hikes in the wake of the turmoil in Turkey and other emerging markets. Further, Trump's criticism of the Fed triggered fears the central bank may slow down the pace of policy tightening in the near future.

However, the Fed minutes released on Wednesday showed the policymakers are set to raise rates next month. As a result, the USD found bids and the EUR/USD faced rejection at the 50-day MA hurdle.

Moreover, for EUR/USD, the path of least resistance is to the downside as the probability of a rate hike in December hike sentiment has risen back above 60 percent. Meanwhile, FEDWATCH is pricing a 25 bp hike in September at 92 percent.

However, the investors would again scale back the Fed rate hike expectations, sending the USD lower across the board if Fed's Powell, during his speech at Jackson Hole later today, stresses more on the negatives laid out in the minutes. In this case, the EUR/USD will likely find acceptance above the 50-day MA, currently located at 1.1608.

The German second-quarter GDP, due for release at 06:00 GMT, and the US durable goods orders figure, scheduled for release at 12:30 GMT, may not have a big impact on the pair as investors are likely to stay on the sidelines ahead of Powell's speech.

EUR/USD Technical Levels

Resistance: 1.1575 (July 19 low), 1.1608 (50-day MA), 1.1623 (Aug. 22 high)

Support: 1.1530 (Aug. 23 low), 1.1508 (June 21 low), 1.1465 (10-day MA)

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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