The EUR/USD pair has reached a new seven-month high of around 1.1000 during Monday’s American session, fueled by a sharp decline in the US Dollar amid growing speculation of potential emergency rate cuts by the Federal Reserve (Fed). The weakening USD reflects concerns about the US economic outlook following recent data suggesting a potential slowdown.
Market Dynamics:
- US Dollar Weakness: The US Dollar Index (DXY) has fallen to 102.20 as investors anticipate a dovish shift in Fed policy due to increasing signs of a potential recession.
- Risk-On Sentiment: Global equities are facing a sell-off, while risk-perceived currencies like the Euro are rallying against the backdrop of a weaker US Dollar.
- Positive US Data: Despite the broader market sentiment, the US Dollar has found some support from the upbeat US ISM Services PMI, indicating continued expansion in the service sector.
- Eurozone Concerns: Persistent inflation in the Eurozone has tempered expectations of further rate cuts by the European Central Bank (ECB), contributing to the Euro’s strength.
Technical Analysis:
The EUR/USD pair is attempting to break out of a Channel formation on a daily timeframe, potentially leading to wider upside moves. The 200-day Exponential Moving Average (EMA) has acted as a strong support level for the Euro bulls.
The 14-day Relative Strength Index (RSI) has risen above 60.00, suggesting a bullish momentum is building. A break above the intraday high of 1.1009 could drive the pair towards the August 10, 2023 high at 1.1065 and the psychological resistance level of 1.1100.
Conversely, a downside move below the August 1 low of 1.0777 could trigger a pullback towards the February low near 1.0700 and potentially the June 14 low at 1.0667.