- Summary:
- Germany's economy contracted in the second quarter, bringing pressure to EURUSD, and disrupting the focus on Fed interest rate cuts.
EURUSD inched up on Wednesday, as investors repositioned themselves for rate cut talk from the Fed. The pair was up by 0.07 percent at the time of writing, reversing Tuesday’s marginal losses. The pair was up 0.2 percent at the time of writing, to trade at 1.0842. On the downside, Germany’s weak economic data will keep EURUSD suppressed, with uncertainty around the European Central Bank (ECB) interest rate decision.
Germany, the Eurozone’s largest economy, reported on Tuesday that its GDP contracted by -0.1 percent in the second quarter of the year, missing the forecast growth figure of +0.1 percent. That will exert downward pressure on EURUSD, much as the Eurozone economy as a whole grew by 0.3 percent, exceeding the forecast growth rate of 0.2 percent.
Meanwhile, developments in the Middle East could impact safe haven dollar. The assassinations of Hamas leader Isail Haniyeh and senior Hezbollah commander Fuad Shukr has raised the prospect of the wider Middle East being drawn to the Israel-Hamas war that traces back to October 7, 2023. Also, FOMC members will issue a statement later on Wednesday, which could inject fresh volatility into the EURUSD pair by providing insights into the impending interest rate cuts.
Momentum indicators
On the 2-hour chart, EURUSD trading pair has crossed above the upper band on the Bollinger Bands indicator. This signifies a strong bullish control, which will likely be maintained if the price stays above the middle band. In addition, the Moving Average Convergence Divergence (MACD) line is well above the signal line, affirming control by the buyers.
EURUSD support and resistance levels
On the EURUSD 30-minute chart, the buyers look set to stay in control above the 1.0841 mark. That could result in further gains to encounter the first resistance at 1.0847. However, extended control by the buyers will likely break that barrier and potentially build the momentum to push the price to test 1.0854. On the other hand, a move below 1.0841 will swing control in favour of the sellers. Beyond that point, the resulting momentum will invalidate the upside narrative, and potentially extend the downside to test 1.0827.
