EUR/USD: Weak US Dollar, Rate Cut Speculation May Fuel Next Leg Above 2024 High
2024.08.20 04:32
The ’s persistent weakness, driven by of upcoming interest rate cuts, has been reflected in the ‘s movements as well.
Currently, the pair is in a robust uptrend, approaching a key resistance level near the 1.11 price area. Traders should focus on two critical events this week: Wednesday’s Federal Reserve and Friday’s speech by Jerome Powell at the conference.
Recent shifts in probabilities now favor a 25 basis point rate cut ahead of the key event. Meanwhile, the market has long dismissed the possibility of keeping interest rates unchanged.
While recent economic data has supported the Euro’s strength, traders remain cautious as the pair approaches a crucial resistance level. A successful break above 1.11 could open the door for further gains.
Will Jerome Powell Surprise the Markets This Week?
Investors will turn their attention to the annual Jackson Hole conference, particularly to Fed Chairman Jerome Powell’s speech. While Powell is unlikely to make groundbreaking comments on monetary policy, the conference may set the stage for a 25 basis point cut in September.
The key question is whether this will be a one-time adjustment with a “wait and see” approach or the beginning of a series of cuts. The direction will depend on incoming data, but if disinflation continues and no recession emerges, a gradual reduction seems prudent to avoid a sharp future cut.
Political factors also loom large, with the upcoming US presidential election as a central event. No candidate currently leads decisively in the polls. Analysis suggests that a potential win by Kamala Harris could favor further reductions, as she is likely to avoid the aggressive tariffs and tax cuts proposed by Trump, which might otherwise pressure prices upward in the short term.
EUR/USD Technical Analysis
The bullish scenario involves a breakout above 1.11 and continued upward towards 1.12, where the long-term peak is located.
A potential rebound could occur if the pair breaks the uptrend line, opening the door for a decline toward the local support at 1.10. Technically, sellers would need substantial momentum to counteract the strong buying trend.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
