The EUR/USD pair is trading sideways above the key support level of 1.0900 on Friday, as investors eagerly anticipate further guidance on the extent of potential interest rate cuts by both the European Central Bank (ECB) and the US Federal Reserve (Fed) this year.
Market Drivers:
- ECB Rate Cut Expectations: While the ECB is widely expected to implement two more rate cuts this year, officials remain cautious about committing to a specific path, citing concerns about the Eurozone’s economic recovery and persistent inflation.
- Fed Rate Cut Expectations: Market participants are divided on the size of the Fed’s rate cut in September, with some anticipating a 50-basis point reduction while others expecting a more modest 25-basis point cut. This uncertainty has led to a slight decline in the US Dollar.
- US Economic Data: Lower-than-expected initial jobless claims for the week ending August 2 have eased concerns about the US labor market, potentially influencing the Fed’s decision on rate cuts.
Technical Analysis:
The EUR/USD pair is trading within a Channel formation on a daily timeframe. The 200-day Exponential Moving Average (EMA) near 1.0800 continues to provide support to the Euro bulls. The 14-day Relative Strength Index (RSI) is currently in the neutral range, suggesting a lack of clear direction.
A break above Monday’s high of 1.1009 could lead to further gains towards the August 10, 2023, high at 1.1065 and the round-level resistance at 1.1100. Conversely, a downside move below the August 1 low at 1.0777 could trigger a pullback towards the February low near 1.0700 and potentially the June 14 low at 1.0667.