Amid movement in narrow ranges since the start of trading this week with a bearish tendency, the price of the EUR/USD currency pair may be exposed to more fluctuations around the issuance of the minutes of the Federal Open Market Committee (FOMC) meeting, as the optimistic statements will increase expectations of raising the US interest rate once more. Remember, the Fed kept US interest rates unchanged at its June meeting but indicated room for further tightening if needed.
On the other hand, dovish statements could lead to losses for the US dollar as this will increase the odds of stopping again. Meanwhile, the leading US jobs indicators could also spur big moves in the forex currency pair, as traders are keen to price in expectations for Friday's NFP report. There is a slowdown in hiring activity, but any hints of another bullish surprise could bring gains for the US dollar even before the actual numbers are released.
On the other hand, the pessimistic US job numbers may stimulate risk appetite, which would be bearish for the greenback. After all, slower employment growth could dampen wage increases and lead to weaker inflationary pressures, giving the Fed less reason to tighten monetary policy.
According to the most recent trades, the EUR/USD exchange rate fell below the 1.0880 support after Federal Reserve Chairman Jerome Powell hinted at more than one additional increase in US interest rates. In a panel discussion between the heads of the European Central Bank, the US Federal Reserve, the Bank of England and the Bank of Japan, ECB President Lagarde boosted expectations for a July increase, but what caught investors' attention were hawkish comments by Fed Chair Powell.
And this time, the Fed chair seemed hawkish enough to wake up the dollar bulls. Powell said he does not rule out the possibility of a July rate hike, and indicated that there will likely be more rate hikes this year before the Fed takes a sideline stance, while his comments indicated that he does not see inflation falling back to its target. This year or next year, these interest rate cuts are out of the discussion for now.
His comments finally convinced some participants that the Fed is likely to do more, but according to Fed Funds Futures, investors haven't initiated two more hikes just yet.
EUR/USD Technical Outlook
- EUR/USD formed lower tops and found support around 1.0845, creating a descending triangle on the hourly chart.
- It seems that the price is trying to break above the resistance around 1.0910. The 100 SMA is below the 200 SMA, so the trend is still bearish.
- In other words, there is a possibility that the ceiling will hold and send the pair back down to the triangle support.
However, stochastic is still pointing higher to indicate bullish momentum, and the oscillator has plenty of room to run up before it reverses overbought levels or exhaustion among buyers. The RSI appears to be moving sideways, indicating a range-bound move. However, a break above the top of the triangle could trigger a rally that is as high as the chart figure, which spans approximately 150 pips.
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