US Dollar Weakens Against Euro Amid Fed Speculations

On Friday, the US Dollar hit an almost two-month low against the Euro. This was largely due to growing expectations that the Federal Reserve might be putting the brakes on interest rate hikes, due to a weak employment report. All eyes are now on US central bank officials, as traders look for hints about future interest rate policies.
Federal Reserve Chairman Jerome Powell is set to speak on Wednesday and Thursday. Powell’s words could have a significant impact on the markets and shape future developments. These speeches are closely watched by traders as they often contain crucial hints for currency markets.

However, it’s essential to consider the other side of the equation. European Central Bank (ECB) President Christine Lagarde made waves with her hawkish comments over the weekend. Her assertive stance may act as a buffer for the EURUSD pair, preventing a major drop. Lagarde’s strong words highlight the power of central bank officials in influencing market sentiment.

Looking at the technical side, the short-term outlook on the 4-hour time frame shows some key support levels. If the EURUSD pair breaks below 1.0670, it could signal further declines, possibly down to the 200-period EMA at 1.0620 or even the 61.8% Fibonacci retracement level at 1.0607. The MACD indicator, currently below the signal line, indicates a leaning toward bearish momentum.

Zooming out to a daily perspective, the 100- and 200-period EMA have formed a “death cross,” typically signalling a bearish trend. However, the MACD, which has crossed above the zero line, hints at a bullish sentiment.
Given these mixed signals, it’s crucial for traders to exercise patience and caution. Before jumping into new long positions, a clear break above 1.0740 would signal a potential shift in momentum, into a bullish one.

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Francois du Plessis

Market Analyst

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