EUR/USD Pair Consolidates Near 1.1000 as USD Strength Weighs on Bulls

The EUR/USD pair is currently consolidating after a sharp overnight decline, hovering just below the psychological level of 1.1000 during the Asian session on Friday.

USD strength continues from the previous day, reaching its highest level since July 11, supported by positive US macro data that increases the likelihood of more interest rate hikes by the Federal Reserve (Fed). Conversely, the EUR is facing downward pressure as the European Central Bank (ECB) did not provide explicit forward guidance about future moves, raising the possibility of a potential pause in September. This caution is holding back bullish bets on the EUR/USD pair and acting as a headwind.

From a technical standpoint, the break below the strong horizontal support at 1.1050 has triggered bearish sentiment. However, the pair has found some support just ahead of the 50% Fibonacci retracement level of the May-July rally, situated near the mid-1.0900s. This level is pivotal, and a decisive break could lead to further losses, potentially challenging the 100-day Simple Moving Average (SMA) around the 1.0900 mark, and then the 61.8% Fibo. level around 1.0880-1.0875.

On the upside, the 1.1000 psychological level is acting as an immediate hurdle, followed by the 38.2% Fibo. level around 1.1030. A sustained move beyond these levels could trigger a short-covering rally, allowing the EUR/USD pair to reclaim the 1.1100 mark. Further upward momentum may face resistance near the 1.1125 region, representing the 23.6% Fibo. level. If this level is surpassed, the bias may shift in favor of bulls, potentially paving the way for a move beyond the 1.1200 mark and retesting the multi-month peak near 1.1275.