Hyperscale Data shifts to bitcoin-only treasury strategy
- EUR/USD bullish trend intact despite French downgrade and political uncertainty.
- US dollar weakness, not euro strength, drives much of the recent rally.
- FOMC decision this week holds the key to next big move.
- Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.
What doesn’t break you makes you stronger. That’s what I feel about the euro, which has continually shrugged off political turmoil in France, suggesting that investors don’t see it spilling over to other European countries. In truth, much of the EUR/USD strength has to do with weakness for the US dollar than strength for the euro.
But whatever the case, the popular trading pair remains in a healthy bullish trend ahead of a key week featuring lots of central bank meetings and data. I still think the EUR/USD could be heading to 1.20 in the coming days, barring a major surprise.
I will discuss the macro factors in greater detail below, but first, let’s take a look at the EUR/USD chart as it continues to paint bullish price action…
EUR/USD Technical Analysis and Trade Ideas
Despite the French political turmoil, the euro has been grinding higher in recent days, and today it found itself holding the breakout above the key 1.17 handle, which it took out last week. With price making higher highs and higher lows and holding above key levels, moving averages, and trend lines, there is no doubt in my mind that the trend is still bullish on the EUR/USD.
As such, there is little point in trying to short the pair or concentrating much on the potential downside targets for now. Instead, the focus should be on where to look for dip buying opportunities and where the pair might be headed from current levels.
Last week saw the EUR/USD break above its short-term bearish trend line. This has potentially opened the door to a continuation towards the July peak of 1.1830, with last week’s high of 1.1780 being an interim target. Beyond these levels, there is not much further obvious resistance seen except around 1.1900 or 1.2000. The latter remains my main upside objective on the pair.
In terms of support levels to watch, the key one now rests at 1.1700, which previously acted as resistance, with a further support zone seen between 1.1560 and 1.1620. Crucially, the pair remains above its rising trend line, keeping the technical bias skewed to the upside, all thanks to a weaker US dollar.
French Downgrade Hardly a Shock
As mentioned, the EUR/USD is holding steady despite Fitch cutting France’s credit rating on Friday evening. The downgrade was largely expected and already reflected in French debt markets. Instead, attention is firmly on Wednesday’s FOMC meeting, which is likely to be the key driver for EUR/USD over the coming days.
But for the euro itself, the real question now is whether new Prime Minister Sébastien Lecornu can unite a fractured National Assembly around the unpopular, but necessary, path of fiscal consolidation. Markets will keep an eye on French fiscal developments, but I don’t see this turning into a wider eurozone crisis.
Meanwhile, on the data front, it’s a quiet week for eurozone figures, though there’s a busy line-up of ECB speakers. We did have Eurozone trade figures, which were hardly inspiring, suggesting US tariffs are beginning to bite. But exports to China were also weak, so it was not all about tariffs. Perhaps it is a global slowdown weighing on exports more so than just tariffs. Still, more data is needed to make a judgment.
All Eyes on Wednesday’s FOMC Decision
It’s a huge week for central banks, with no less than five G10 meetings scheduled. The main event, certainly for the EUR/USD, is, of course, the FOMC on Wednesday. A 25bp cut is widely expected, followed by two more in October and December. That makes a total of 75 bps of cuts.
But markets are currently pricing in 68bp of that, suggesting there is more room for the US dollar to fall if data weakness persists or the Fed signals two more cuts are on the way this year in the dot plots. The US dollar may also come under sharp pressure if, on Wednesday, it is revealed that a 50bp cut was a closer call than most anticipate.
On the US calendar front, Tuesday brings August retail sales data, while Wednesday will deliver some housing market data (that will likely be completely overshadowed by the FOMC), and Thursday we will have weekly jobless claims data.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.