EUR – Powell's comments dampen hopes for a September rate cut, dollar rises

The dollar continued to rise against major currencies on Wednesday as the Federal Reserve, ignoring pressure from President Trump, held interest rates steady. The Federal Open Market Committee voted 9-2 to hold the benchmark overnight rate steady in a range of 4.25%-4.50% for the fifth consecutive meeting. Trump-appointed Vice Chairman for Financial Regulation, Bowman, and Governor Waller dissented, favoring a 25 basis point rate cut. In a subsequent press conference, Fed Chairman Powell said he expected a slow process in understanding how trade tariffs affect inflation. Federal funds futures prices, according to calculations by the London Stock Exchange Group (LSEG), have lowered the probability of a September rate cut to 50%, down from 65% before the Fed's statement. In addition to the Fed's post-meeting statement, earlier economic data also lent support to the dollar. Data showed that US economic growth rebounded more than expected in the second quarter, increasing by 3%, compared with economists' expectations of 2.4%.

Regarding U.S. trade negotiations, the trade agreements reached with Japan last week and with the European Union over the weekend demonstrated a renewed U.S. commitment to global engagement, alleviating investor concerns. After Chinese and U.S. officials agreed to seek an extension to the 90-day tariff truce, investors are currently focused on the negotiations between the two countries. However, Trump escalated his attacks on India and Brazil on Wednesday. He announced a 25% tariff on Indian goods imported into the US, effective August 1st, and signed an executive order imposing an additional 40% tariff on Brazilian goods, bringing the total tariff to 50%.

As the U.S. dollar continued to rise, the euro/dollar pair also declined, testing the 1.14 level, marking its fifth consecutive day of decline. As shown on the technical charts, the RSI and Stochastics continued to decline, with the 10-day moving average crossing below the 25-day moving average, forming a bearish crossover. The exchange rate also briefly broke below the July 17 low of 1.1555, suggesting a potential test of the double top pattern. Based on the golden ratio, the 50% and 61.8% ranges are at 1.1445 and 1.1355, respectively. Major support levels are expected to be between 1.12 and 1.1060. Resistance levels are expected to be at 1.15 and the 50-day moving average at 1.1570. The next levels are expected to be at 1.1660 and 1.1780.

Forecasted Range:
Resistance: 1.1500 – 1.1570 - 1.1660 – 1.1780
Support: 1.1445 – 1.1355 – 1.1200 – 1.1060

News Summary
28/7
EU and EU reach trade deal; US imposes 15% import tariffs on most EU goods

30/7
First estimate of Eurozone Q2 GDP: 1.4% year-on-year growth
First estimate of Eurozone Q2 GDP: 0.1% quarter-on-quarter growth
Eurozone July Consumer Inflation Expectations Index: 25.1
Eurozone July Economic Sentiment Index: 95.8
Eurozone July Industrial Sentiment Index: -10.4
Eurozone July Consumer Confidence Index: -14.7

Focus:
Thursday
Germany June Import Prices (2:00 PM)
France July HICP and PPI (2:45 PM)
Germany July Unemployment (3:55 PM)
Eurozone June unemployment rate (5:00 PM)
Germany July CPI and preliminary HICP figures (8:00 PM)

Friday
Eurozone July manufacturing PMI
Eurozone July preliminary HICP figures (5:00 PM)

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