The Euro to US Dollar exchange rates were trending lower on Friday, with the dollar continuing its path to achieve its longest weekly winning streak in nine years during Friday’s trading. Meanwhile, the Euro faces eight consecutive weeks of losses.
I can say that strong economic data has recently supported the strength of the US dollar. As a result, investors are questioning the Federal Reserve’s future strategy for raising interest rates.
In my opinion, the current focus in currency markets has returned to the relative difference between the US and European economies, thus ruling out a near and medium-term scenario of a decline in the US dollar index.
Data this week revealed unexpected growth in the US services sector for August, while the United States recorded its lowest jobless claims since February. In contrast, July saw a slightly larger-than-expected decline in industrial production in Germany, Europe’s largest economy, which has weakened the Euro to Dollar exchange rate recently.
In my view, as the US economy continues to demonstrate its strength, the European economy appears to be in a relatively stable state. The US dollar typically performs well when the United States outperforms its counterparts, as is happening now.
Expectations are also growing among most economists that the European Central Bank will maintain interest rates on September 14 and temporarily keep them at their current levels. Federal Reserve is expected to raise interest rates by 25 basis points later this year to combat stubbornly high inflation, with a 40% chance, according to forecasts.
European Central Bank President Christine Lagarde increased the chances of not raising European interest rates when she announced in her press conference in July, saying, ‘Do we have more inflation to lower? At this stage, I won’t say that.’
During this week, there have been a few major market-moving events, and I believe the markets will digest the data released during the week and price it in as the weekly market close approaches, as neither the United States nor the Eurozone has released any major reports today.
The EUR/USD pair is making another attempt to break below the 1.0700 support level in the chart above. The pair extended its primary downtrend when it breached the price below the 1.0775 support level. Currently, the pair has temporarily halted at another strong support level near $1.07047.
Indicators on the chart suggest the continuation of the downtrend. The EUR/USD is currently trading below the 30-day Simple Moving Average, indicating that bearish momentum dominates the prospects and expectations for the future of the EUR/USD in the short and medium term.
Additionally, the Relative Strength Index (RSI) supports the continuation of the primary downtrend, with the signal line near the overbought zone. The price will likely see a strong downward push soon, targeting levels below the strong support level at $1.0700.
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