- EUR/USD breaks above 1.1150 as the dollar weakens following the Fed's first rate cut in over four years.
- Market expectations for further easing support the euro's upward momentum against the dollar.
- Key resistance at 1.12 could signal further gains if breached, while support holds between 1.1075 and 1.1125.
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EUR/USD climbed above 1.1150 in Thursday's European session, fueled by a weakening US dollar as traders digest the Fed's significant interest rate cut and anticipate further easing measures.
The USD, tracked by the DXY USD Index, slipped below 100.70 after failing to maintain its recent weekly high near 101.50.
The Fed's recent move marked its first interest rate cut in over four years, reducing the key borrowing rate by 50 basis points (bps) to 4.75%-5.00%.
This substantial cut signals policymakers' commitment to protecting the labor market and reflects their confidence in progress toward the 2% target for inflation.
As the market had largely priced in expectations for a shift toward looser monetary policy, the euro resumed its upward trajectory against the dollar last week.
Although Fed Chair Jerome Powell's remarks initially supported the dollar, they ultimately lacked the strength to alter the bullish outlook for EUR/USD.
Criticism of the Fed's approach to policy easing amid a struggling job market has caused some concern among market participants.
Powell countered these criticisms in his speech, asserting that their measured approach has contributed to a noticeable decline in inflation.
Currently, while inflation remains above the 2% target, Powell welcomed the recent pullback and indicated a willingness to adjust policies based on employment data.
This stance reinforces expectations for at least another 50 basis point rate cut by year-end, suggesting a continued weakening of the dollar.
Meanwhile, positive inflation data from the Eurozone enhances the European Central Bank's (ECB) capacity to maintain a gradual rate cut cycle, providing additional support for EUR/USD.
Technical View: EUR/USD Swings Wildly Following the Fed
Recent price action confirms that EUR/USD has completed its partial correction of the upward trend. The pair found support around the 1.10 level and continued its ascent after yesterday's volatility, reaching as high as 1.1170 in strong buyer-driven trading today.
Looking ahead, the first significant resistance for EUR/USD lies at the August peak of 1.12. A breakthrough at this level could potentially push the pair into the 1.125-1.132 range.
On the downside, the support range between 1.1075 and 1.1125 remains intact, offering a cushion for the pair.
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