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02/09/24
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EUR/USD Recovery: Dovish Fed Supports Euro Amid Anticipated Rate Cuts
The EUR/USD pair has shown signs of recovery as it trades at approximately 1.1055 during the early hours of Monday in Europe. This rally allows the currency pair to break a three-day decline. The US Federal Reserve’s dovish approach has weakened the US dollar, offering support to the euro. Currently, the market is anticipating a 25 basis points rate cut by the Fed in September with 70% likelihood projection, while a more significant cut of 50 basis points is projected at a 30% chance. Investors are keenly awaiting US employment data scheduled for release on Friday, as it may provide further insights into potential monetary policy adjustments.
On a technical analysis front, the positive outlook for the EUR/USD remains intact. The pair is positioned above the vital 100-day Exponential Moving Average (EMA) on the daily chart, suggesting continued bullish sentiment. However, it’s important to note that the 14-day Relative Strength Index (RSI) is currently signaling neutral momentum, indicating the possibility of a period of consolidation before any significant moves.
The first resistance level to observe is at 1.1185, corresponding to the peak reached on August 28. Should the pair breach this level, the next target would be around 1.1230, marked by the upper boundary of the Bollinger Bands. A decisive movement above this point could trigger a rally towards 1.1275, which is the high from July 18.
Conversely, if the bearish scenario unfolds, strong support is identified at the psychological level of 1.1000. A fall below this level may propel the pair down to 1.0950, the low recorded on August 15. Additional support exists near the 100-day EMA at 1.0893, with further downside risk approaching the lower limit of the Bollinger Bands at 1.0863.
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