- Tensions in the Middle East have investors rushing for dollars.
- Incoming data may change expectations about the size of the Fed’s rate cut.
- ECB policymakers are poised to start cutting borrowing costs in September.
The EUR/USD forecast points south as the dollar rises ahead of GDP and inflation data. As tensions in the Middle East escalate, the dollar has recovered from recent declines on safe-haven demand. Meanwhile, ECB policymakers are pleased with the rate cut in September.
-Are you interested in learning more about the Live Forex Calendar? Click here for details –
The dollar was initially weak after Powell’s speech on Friday, which firmed bets for a September Fed rate cut. However, the trend reversed this week as tensions in the Middle East sent investors scrambling for dollars. The war in Gaza escalated and the prospect of a cease-fire agreement diminished. The dollar tends to rise in times of global uncertainty.
However, downward pressure remains as investors fully appreciate the Fed’s pivot in September. Incoming data may change expectations about the size of the rate cut. Currently, there is a higher chance of a 25 bps speed reduction. However, further economic weakness and easing price pressures could lead to more significant rate cuts.
Market participants expect today’s GDP data to show the state of the economy. Recent GDP data has shown resilience, so an unexpectedly bad data could fuel expectations of a rate cut. At the same time, the US will release its PCE price index on Friday, showing the state of inflation.
Meanwhile, ECB policymakers are poised to start cutting borrowing costs in September. But some, like Klaas Knott, remain cautious, saying more data is needed to confirm a rate cut.
EUR/USD key events today
- USA surpasses GDP q/q
- US unemployment claims
EUR/USD Technical Forecast: Bears eye support at 1.1050 after reversal
On the technical side, the EUR/USD price is falling after breaking below and retesting the 30-SMA. This is a sign that the bears have taken control and reversed the trend. The previous bullish trend peaked at the 1.1201 resistance level, where the bullish momentum weakened.
-Are you interested in learning about forex signals? Click here for details –
Notably, the RSI made a bearish divergence, showing momentum fading as price made higher highs. In the end, the bears overpowered the bulls, pushing the price below the 30-SMA. At the same time, the RSI dropped below 50 to trade in bearish territory. The price may soon reach the support level of 1.1050 due to strong bearish bias.
Do you want to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
