The EUR/USD currency pair is precariously positioned near an eight-week low of 1.0950 in Wednesday’s European session, continuing to experience downward pressure as the US Dollar (USD) gains momentum, with the US Dollar Index (DXY) hovering around a seven-week high of 102.60.
The strengthening of the USD follows traders adjusting their expectations regarding the Federal Reserve’s (Fed) interest rate policy, particularly after a robust Nonfarm Payrolls (NFP) report for September alleviated concerns about economic growth and consumer spending. Additionally, heightened tensions in the Middle East have enhanced the dollar’s appeal as a safe haven.
Currently, market participants anticipate a 25 basis point cut in interest rates during the Fed’s remaining policy meetings this year, according to the CME FedWatch tool. Attention will turn to the release of the Federal Open Market Committee (FOMC) Minutes from September’s meeting at 18:00 GMT, where officials unanimously voted to initiate a policy-easing cycle, aside from one dissenting member favoring a smaller cut.
The outlook for the USD will further depend on upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) data set to be released on Thursday and Friday, respectively.
The Euro (EUR) is also under selling pressure as traders anticipate additional rate cuts from the European Central Bank (ECB), with expectations for a 50 basis point reduction to 3% by year-end. The ECB has already lowered key borrowing rates this year, with further cuts expected in response to declining price pressures and economic vulnerabilities in the Eurozone.
Technical indicators suggest the EUR/USD pair may find support near the 200-day EMA around 1.0900, while resistance levels are seen at the 20-day EMA of 1.1090 and the September high of 1.1200. The 14-day Relative Strength Index (RSI) remains in a bearish range, indicating potential further weakness ahead.
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