- Summary:
- Gains by EURUSD slowed down on Monday after Trump's shooting over the weekend and Israel's Gaza airstrikes raised the dollar's risk premium.
The EURUSD currency pair traded flat in Monday’s intraday session as the US dollar fought back on new geopolitical pressures. The pair was at 1.0904 at the time of writing, having eased down from a three-week high of 1.0920. The greenback remains under pressure from expected Fed interest rate cuts, with the CME FedWatch tool indicating that the odds of a September rate cut had risen to 93 percent at the time of writing. However, geopolitical developments over the weekend have given the dollar a lifeline that could provide near-term support.
The headline news on the geopolitical scene over the weekend was the shooting of former United States President and Republican Party Presidential candidate, Donald Trump. Many analysts opine that the shooting solidifies prospects of Trump’s return to the White House, and, with it, a significant level of hawkish policies.
One of the hallmarks of Trump’s policy points during the campaign has been calls for the extension of corporate taxes and looser regulation, which is interpreted as bullish for the US economy, and by extension, the dollar. Generally, markets’ reaction to the Trump shooting incident mirrored the reaction seen following President Joe Biden’s underwhelming performance during the first Presidential Election Debate.
Elsewhere, in the Middle East, Israel conducted airstrikes in Gaza over the weekend, which left at least 90 people dead. That action is seen as a backpedaling in the quest for peace and could dampen the ceasefire talks that had resuscitated hopes of a return to peace in the region. However, that also puts pressure on EURUSD as it strengthens safe haven dollar. Fed Chairman Jerome Powell will speak to Bloomberg later on Monday, and investors expect more cues from him regarding Fed rate cuts following last week’s soft inflation figures.
Technical analysis
The momentum on EURUSD favour continuation of the upside if the pair stays above the pivot mark at 1.0902. That could see the first resistance encountered at 1.0911, beyond which the resulting momentum could see further gains to test 1.0920. However, a move below 1.0902 will signal control by the sellers, with the first support likely to come at 1.0896. A breach of that mark will strengthen the downside momentum, thereby invalidating the upside narrative and potentially establishing the second support at 1.0889.
