EUR/USD trades near last week’s high (0.9854) following the USD’s weakness; however, the recent rebound in the exchange rate seems to be delayed ahead of the former support zone around the July low (0.9952) as it is not extending last week’s series of higher highs and lows.
EUR/USD seems to have changed course after its failed attempt at testing the June 2002 low (0.9303) while the Relative Strength Index (RSI) regains from oversold territory. The currency pair might try testing the 50-Day SMA (1.0016) if its endeavor to push above the former support zone around the July low (0.9952) is successful.
However, EUR/USD may keep moving in the negative direction in the moving average as the Fed pursues a restrictive policy, and the European Central Bank’s (ECB) September meeting might not influence the exchange rate as the Governing Council “frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to our two percent medium-term target.”
The comments suggest the ECB will normalize monetary policy, albeit slowly. The central bank admits that “risks to growth are primarily on the downside,” but the unexpected rise in the Euro Area Consumer Price Index (CPI) may cause President Christine Lagarde and Co. to deliver another 75bp rate hike at the next meeting on October 27 as the Governing Council pledges to “follow a meeting-by-meeting approach.”