- The euro reached a new two-month peak at 1.1800, bolstered by a declining US dollar.
- Expectation for a significant shift by the Federal Reserve is weighing on the dollar.
- Bulls in the EUR/USD pair are facing resistance around 1.1790, eyeing a long-term target of 1.1830.
On Tuesday, the EUR/USD pair gained for the fourth straight day, crossing above 1.1790 for the first time since July. Anticipation surrounding the Federal Reserve’s upcoming decisions is keeping the dollar somewhat weak, especially ahead of the German ZEW sentiment data release and eurozone industrial production figures.
Interestingly, President Trump urged for more substantial rate cuts via social media, highlighting the significant political influence on economic decisions.
Market sentiment seems to favor lower interest rates—perhaps a bit surprisingly. As a result, the US dollar index has dropped to near two-month lows, while the Wall Street index hit a new record high. Amidst this backdrop, investors seem to show a greater appetite for risk, pushing the euro even higher, despite ongoing concerns regarding French debt.
Later in the day, data on industrial production in the eurozone and the ZEW economic sentiment index may reveal how robust the euro truly is. Meanwhile, the upcoming retail sales data in the US for August could give some direction for the dollar, though it likely won’t alter expectations for a Fed rate cut on Wednesday.
Daily Digest Market Movement: Hopes for Lower Interest Rates Weigh on the US Dollar
- The dollar is lagging behind market prices as expectations mount for a quarter-point rate cut on Wednesday. Many investors seem to think the Fed is not keeping up and might need to implement more aggressive rate cuts in the near future.
- The US Senate confirmed Stephen Milan, a former economic adviser to Trump, as governor, raising concerns about loyalty to the president during the meetings.
- A federal appeals court blocked an attempt to impeach Trump over mortgage fraud allegations, meaning that federal governor Lisa Cook will also join discussions in the coming days.
- The German ZEW index is projected to show a decline in economic sentiment for September, dropping from 34.7 in August to a concerning level. This could push the bulls back if confirmed, adding tension in the eurozone.
- Conversely, there’s an expectation for a 0.4% rise in industrial output for July in the eurozone, bouncing back from a decline in June, which could mitigate any negative impact from weak sentiment scores.
Technical Analysis: EUR/USD Trends Toward the 1.1800 Area
The EUR/USD pair is trending upward, primarily due to the US dollar’s weakness rather than any internal eurozone issues—at least for the moment. The technical indicators, including a relative strength index (RSI) of 66 on a 4-hour chart, signal strong bullish momentum.
The bulls broke past the previous high of 1.1790 from July 24, and the euro is currently hovering around the 1.1800 mark. The previous high from July 1st was 1.1830, and the Fibonacci tool indicates further expansion possible up to 1.1885.
On the downside, prior resistance is now acting as support around 1.1750, with the next significant level being 1.1700 from September 12. Should prices fall below this point, the September 11 low near 1.1660 could come into play.
Upcoming Economic Indicators
Zew Survey – Economic Sentiment
The ZEW index, released by the Zentrum Für Europäische Wirtschaftsforschung, gauges institutional investors’ sentiment. Positive readings suggest optimism outweighs pessimism, which is generally seen as bullish for the euro, while negative readings indicate the opposite.
