The EUR/USD pair edged higher on Tuesday, recovering from Friday’s dip towards 1.0670. This upward move was fueled by a surge in risk appetite, weakening the US Dollar (USD) and boosting the Euro (EUR). With a relatively quiet economic calendar early in the week, traders are focusing on policymakers’ statements and growing expectations of a Federal Reserve (Fed) rate cut in September.
Market Drivers: Risk Appetite and Fed Rate Cut Speculation
- Risk-On Sentiment: A positive risk appetite among investors is driving the EUR/USD pair higher, as concerns about the global economy ease and hopes for a Fed rate cut grow.
- German Economic Data: While German sentiment surveys missed expectations on Monday, the broader market sentiment seems to be overshadowing these concerns.
- Fed Rate Cut Bets: Market participants are increasingly pricing in a 25 basis point rate cut by the Fed in September, with the CME FedWatch Tool indicating a 70% probability.
Technical Analysis: EUR/USD Faces Key Resistance
Despite the recent rebound, the EUR/USD pair is struggling to break above the 200-hour Exponential Moving Average (EMA) at 1.0737. The pair remains below the 200-day EMA at 1.0815, suggesting a broader bearish trend.
Key Events to Watch:
- German Central Bank President’s Speech: Traders will be watching for any insights on the ECB’s monetary policy stance.
- Fed Speakers: Several Fed officials are scheduled to speak, and their comments could influence market expectations for future rate cuts.
- Upcoming Data Releases: Key data releases later in the week, including US GDP figures, German retail sales, and the US Personal Consumption Expenditure (PCE) Price Index, could trigger further volatility in the EUR/USD pair.
