Title: EUR/USD Forecast: Euro Strengthens Toward 1.17 as Dollar Softens Amid Fed Uncertainty
By Adam Solomon | Original article published on CurrencyNews.co.uk
The Euro to US Dollar (EUR/USD) exchange rate showed a firm upward trend in recent trading sessions, climbing to levels not seen in over a month. The pair advanced well above the key psychological level of 1.09, reaching highs near 1.0950 and now eyeing the 1.17 threshold as market sentiment continues to shift in favor of the Euro. Mounting concerns surrounding the US economic outlook and uncertainty about the Federal Reserve’s interest rate trajectory have weighed heavily on the Dollar, providing bullish momentum for the Euro.
This forecast explores the drivers behind the recent appreciation of the EUR/USD pair, highlights upcoming risk events, and provides an outlook on where the exchange rate could head in the coming weeks.
Key Factors Fueling the EUR/USD Rally
A complex mix of monetary policy speculation, economic indicators, and global market sentiment has driven the latest movement in the EUR/USD pairing. Several factors are playing a role in swinging the balance of Forex markets:
1. Dovish Shift in Federal Reserve Expectations
– The Federal Reserve had previously signaled possible interest rate hikes aimed at curbing persistent inflation.
– However, recent US economic data suggests that inflation is slowing, raising the possibility that the Fed could pause or reverse its tightening cycle earlier than initially expected.
– Traders have started to price in rate cuts in early 2025 if inflation continues its downward trajectory.
– This shift in sentiment has weakened the Dollar against major counterparts, including the Euro.
2. European Central Bank (ECB) Holds Hawkish Line
– In contrast to the growing dovishness of the Fed, the ECB continues to maintain a more assertive stance.
– While the Eurozone also shows signs of slowing inflation, the ECB has reiterated its focus on bringing inflation firmly back to its target.
– ECB President Christine Lagarde emphasized the bank’s willingness to keep rates elevated for longer, helping to support the Euro.
3. Weakening US Economic Data
– Recent reports on US job creation, consumer confidence, and manufacturing point to a slowing economy.
– The August non-farm payrolls report showed weaker-than-expected hiring, while jobless claims data revealed a mild uptick in unemployment filings.
– A softer US economy reduces the likelihood of additional policy tightening by the Fed, thereby undercutting the Dollar further.
4. Resilient European Economic Performance
– In spite of a fragmented recovery, certain segments of the Eurozone economy have displayed resilience.
– German industrial production beat expectations in July, and Spain reported stronger-than-expected retail sales.
– These results have provided investors with more confidence in the Eurozone’s recovery going into the final quarter of the year.
5. Increased Demand for Risk Assets
– The improving risk appetite among global investors has led to higher demand for riskier assets, including the Euro.
– The Dollar, often viewed as a safe-haven asset, tends to lose appeal in risk-on environments.
– Equity markets have also rallied, reducing the safe-haven appeal of the USD and adding tailwinds to EUR/USD.
Technical Analysis: EUR/USD Targets Further Gains
Market analysts believe the current technical structure supports additional upside in the EUR/USD pair. The pair broke out of a consolidative range and has shown consistent strength over multiple sessions.
Key Technical Highlights:
– The 50-day and 100-day moving averages have formed a bullish crossover, signaling sustained upward momentum.
– Short-term resistance is spotted near the 1.10 level, with a medium-term target set at 1.17.
– Support remains near 1.0850, with stronger technical demand around the 1.0775 zone if a pullback occurs.
For traders and investors, the current outlook suggests a bullish bias remains
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