Current trend

During the Asian session, the EUR/USD pair shows ambiguous trading dynamics, consolidating near 1.1180.

The US Fed Chairman Jerome Powell believes that the time has come to cut core interest rates, which are now at a two-decade peak. Although the official did not specify the volume of a possible adjustment, he noted the weakening of inflation and added that economists will closely monitor the state of the labor market. Against this background, traders have revised their forecasts and now expect a reduction in borrowing costs by 25 basis points at the September meeting, and in general, according to the Chicago Mercantile Exchange (CME) FedWatch Instrument, it may reach 100 basis points in 2024.

The positive dynamics of the euro are supported by macroeconomic data. The service PMI increased to 53.3 points in August, above the forecast of 51.7 points and the previous value of 51.9 points. The manufacturing PMI was 45.6 points, compared to the calculations of 45.7 points, without affecting the “bullish” sentiment on the instrument. In the minutes of the European Central Bank (ECB) published on August 22, the Governing Council emphasized its determination to ensure that inflation returns to the target level of 2.0% and to maintain policy at a sufficiently strict level until this goal is achieved.

Support and resistance

The long-term trend is upward. Last week the price broke the resistance level of 1.1138, renewing the December high. The next growth target is the 2023 extreme of 1.1256, after consolidation above, the level of 1.1475 may be reached. It is better to pay attention to the RSI (21) indicator, which is near the overbought area, which may lead to a long-term correction soon.

As part of the medium-term uptrend, the trading instrument crossed zone 2 (1.1018–1.1002) last week and reached zone 3 (1.1186–1.1170), after consolidation above which the next target will be zone 4 (1.1354–1.1338). If the 1.1186–1.1170 area is held, a downward correction will begin, within which the quotes may test the key trend support area of ​​1.1033–1.1016, from where long positions, with the target at the current week’s high of 1.1200 are relevant.

Resistance levels: 1.1256, 1.1382, 1.1475.

Support levels: 1.1160, 1.1103, 1.1010.

Trading tips

Short positions may be opened from 1.1255, with the target at 1.1160 and stop loss 1.1290. Implementation period: 9–12 days.

Long positions may be opened above 1.1290, with the target at 1.1382 and stop loss 1.1255.