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EUR/USD hangs on to modest recovery gains near 1.0450, lacks continuation

  • EUR/USD has rebounded from the one-month lows reached this Tuesday.
  • Risk appetite and falling US bond yields weigh on the dollar and offer some support for the pair.
  • Expectations of an aggressive Fed rate hike should act as a tailwind for the dollar and limit the pair’s gains.

The pair EUR/USD showed some resistance below the 1.0400 level and staged a good rebound from the low of almost a month that it reached this Tuesday. The pair continued its intraday rise during the first hour of the European session and reached a new daily high around 1.0450 in the last hour.

The change in trend in global risk sentiment, reflected in a positive tone in equity markets, prevented investors from opening new bullish positions around the safe-haven dollar. In addition, the Pullback in US Treasury yields weakened the USDwhich in turn was seen as a key factor helping the EUR/USD pair attract some buying.

At the moment, the pair has broken a three-day losing streak, although more gains seem unlikely. Market participants appear to be convinced that the Federal Reserve will tighten its monetary policy at a faster pace to combat rising inflation, which reached a four-decade high in May. This should act as a tailwind for US bond yields and the dollar, which should cap the EUR/USD pair.

Thus, it is prudent to wait for strong continuation buying before confirming that the recent drop from the post-ECB high around the 1.0775 area is over. Investors are now awaiting the release of the German ZEW index and the US PPI Producer Price Index, to be released later in the American session.

However, attention will remain focused on the outcome of the FOMC’s two-day monetary policy meeting, due to be announced on Wednesday. Markets have been pricing in the possibility of at least one big rally at the September meeting. Therefore, a 75 basis point rise would cause a jolt across asset classes, which should lift the dollar and put downward pressure on the EUR/USD pair.

EUR/USD technical levels

EUR/USD

Panorama
Last Price Today 1.0466
Today’s Daily Change 0.0057
Today’s Daily Change % 0.55
Today’s Daily Opening 1.0409
Trends
20 Daily SMA 1.0651
50 Daily SMA 1.0668
100 Daily SMA 1.0917
200 Daily SMA 1.1196
levels
Previous Daily High 1,052
Previous Daily Minimum 1.04
Previous Maximum Weekly 1.0774
Previous Weekly Minimum 1.0506
Monthly Prior Maximum 1.0787
Previous Monthly Minimum 1,035
Daily Fibonacci 38.2% 1.0446
Daily Fibonacci 61.8% 1.0474
Daily Pivot Point S1 1.0366
Daily Pivot Point S2 1.0323
Daily Pivot Point S3 1.0246
Daily Pivot Point R1 1.0486
Daily Pivot Point R2 1.0563
Daily Pivot Point R3 1.0606

Source: Fx Street

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