FX.co ★ EUR/USD

The euro gained ground against the US dollar this week, as the American currency weakened broadly. This decline came after a rise in US jobless claims, which rekindled hopes for a Federal Reserve rate cut. The number of new unemployment claims in the US reached a high not seen since last August, fueling investor risk appetite as signs of weakness emerged in the US labor market. Market expectations for a rate cut are now priced in, with a 70% chance of a 25 basis point reduction at the Fed's September meeting, according to CME's FedWatch tool. The odds of a second cut before the end of the year are also high, at 67%. The euro itself rose in price throughout the week, reaching 1.0790 by Monday morning and testing the 200-day moving average. However, despite the euro's recent climb, some technical indicators suggest headwinds ahead. The daily candlestick chart near the 1.0788 resistance level warns of potential struggles for further upward momentum. The pair is also having difficulty building on the gains made from its recent swing low near 1.0600. On the other hand, there's a sense that the euro is currently undervalued. The overall trend for EUR/USD throughout 2023 has been upwards, with a low near 1.05. The dip to 1.06 last month seems to have attracted cautious buyers.

The technical picture remains somewhat ambiguous. While the euro is currently trading below key moving averages that are also trending downward, there have been attempts by bulls to break through this resistance. This suggests a potential for renewed upward movement. Looking ahead, the current balance between long and short positions in EUR/USD means all eyes are on where the pair will head next. A significant move (around 1%) in either direction could signal the start of a longer-term trend. If the euro breaks above 1.0850, it could climb towards 1.1050 with the possibility of further gains. Conversely, a drop below 1.0650 could force buyers to regroup and might lead to further depreciation.