EUR/USD Continues Downward Trajectory Amid Hawkish Fed Remarks and ECB Rate Hike Speculations

Arslan Butt•Friday, August 25, 2023•2 min read

The EUR/USD currency pair is experiencing ongoing selling pressure for the second consecutive day on Friday, leading it to reach its lowest level since June 14 during the Asian trading session. The current spot prices are trading within the range of 1.0785-1.0780, reflecting a decline of 0.25% for the day.

These movements indicate a potential sixth consecutive week of losses for the pair.

The recent hawkish comments made by officials from the Federal Reserve (Fed) have left the door open for another 25 basis points rate hike by the end of the year. This stance has propelled the US Dollar (USD) to a more than two-month high. Additionally, speculations circulating about the European Central Bank (ECB) potentially pausing its streak of nine successive rate hikes in September have cast doubt on the shared currency’s strength. Consequently, the EUR/USD pair is facing a bearish sentiment.

From a technical viewpoint, the downward trajectory has led spot prices to dip below the crucial 200-day Simple Moving Average (SMA) for the first time since November 2022. This development could serve as a new trigger for bearish traders, reinforcing the possibility of the pair extending its descending trend that began over a month ago. This trend initiated from its peak around the 1.1275 region, achieved on July 18.

Nonetheless, it is worth noting that the Relative Strength Index (RSI) is on the cusp of entering oversold territory. This aspect necessitates caution in light of the impending speeches by Fed Chair Jerome Powell on Friday and ECB President Christine Lagarde on Saturday at the Jackson Hole Symposium. Despite this caution, the overall fundamental landscape suggests that the EUR/USD pair’s trajectory is skewed to the downside.

Moreover, a convincing breach and confirmation below the significant 200-day SMA lend credibility to the negative outlook. Subsequently, a further decline towards the subsequent relevant support near the range of 1.0750-1.0745 is a plausible scenario, with a potential continuation towards the psychological 1.0700 mark. If this selling pressure persists, the May 2023 swing low around 1.0635 could come into play.

On the opposing side, any short-term recovery above the 1.0800 psychological level may be perceived as a selling opportunity and could face resistance around the 1.0840 region. Beyond that, the 1.0870-1.0875 supply zone would be the next hurdle. If this zone is cleared convincingly, it could negate the prevailing bearish outlook. Subsequently, the EUR/USD pair might target the 1.0900 psychological level, followed by testing the resistance zone of 1.0915-1.0920.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.