Article by: ETO Markets
This week, the forex market has been particularly focused on the Federal Reserve's (Fed) interest rate decision. Although the Fed decided to maintain the current interest rate levels, the US dollar showed a somewhat weak performance globally, which provided support to major currency pairs like the EUR/USD. Additionally, Fed Chair Jerome Powell hinted that a rate cut in September might be considered if inflation continues to remain near target levels, further influencing market sentiment.
In Europe, the latest inflation data shows that inflation levels are still rising, adding more uncertainty to the upcoming policy meeting of the European Central Bank (ECB). Investors remain cautious about the ECB's potential interest rate adjustments at its next meeting, especially against the backdrop of a slight increase in inflation.
In Australia, the latest economic data indicates that, despite a trade surplus that exceeded expectations, the impact on the Australian dollar has been relatively limited. The market adopts a wait-and-see attitude towards potential adjustments in monetary policy by the Reserve Bank of Australia (RBA), particularly after the release of inflation and employment data, anticipating that the RBA may not raise rates further in the short term.
Global geopolitical risks, including tensions in the Middle East and uncertainties in US-China trade relations, continue to affect market sentiment, leading to a reduced appetite for risk assets. Under these combined factors, the demand for safe-haven assets remains stable.
The EUR/USD pair has seen some resilience in response to recent developments within the U.S. and Eurozone economies. Following the Federal Reserve's decision to hold interest rates steady, the euro has found modest support as investors reevaluate the trajectory of U.S. monetary policy. Additionally, inflation in the Eurozone continues to exert pressure on the European Central Bank to maintain a cautious stance towards rate cuts.
From a technical point of view, The EUR/USD has rebounded after a continuous decline to the 50% Fibonacci level at …. The 50-day simple moving average (SMA) at … now serves as the new resistance, followed by the 23.6% Fibonacci level near …. Should sellers take control, the 61.8% Fibonacci level at … will be a critical support position.
For the AUD/USD, the currency pair has experienced downward pressure due to a mix of domestic and international factors. Despite a better-than-expected trade surplus, concerns over slowing wage growth and employment have tempered expectations for any near-term rate hikes by the Reserve Bank of Australia. Additionally, the softening economic data from China, Australia's major trading partner, has further dampened sentiment. The AUD/USD might find immediate support at the … level, with further downside potentially testing the … threshold. Resistance could be encountered near the … zone, a psychological level that has capped previous upward movements.
From a technical perspective, The AUD/USD has rebounded after setting a new low since May at …, but the downward turning of most moving averages suggests that there is still momentum for further declines. In the short term, resistance for a rebound is near the 200-day simple moving average (SMA) at …, while support below is around the low set yesterday at ….