Euro-dollar holds strength but $1.10 likely to cap gains
Euro-dollar was significantly less active since the middle of last week as traders evaluated probabilities for monetary policy over the next few months. The Fed is now around 50-50 on whether it’ll call for a single or double cut on 18 September while analysts generally expect the ECB to cut twice more before the end of the year. Overall, economic conditions are significantly better in the USA than the eurozone.
The next move depends very much on the result of American inflation on Wednesday 14 August. The base case seems to be a slightly lower figure given the consensus and the recent significantly weaker NFP. In that situation, the price might retest $1.10. However, movement much above there seems unlikely for now – unless there’s a really big downward surprise from inflation – given that large wick on 5 August and the 50% monthly Fibonacci retracement.
$1.10 has been an important area of resistance since February 2023 so a major shift in narrative or monetary policy would probably be necessary to see a sustained uptrend above there. If inflation comes in higher, which currently doesn’t seem very likely, any of the 50, 100 and 200 SMAs might function as dynamic support. The strongest of these could be the 100 SMA around $1.08.
This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.
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