EUR/USD Review: Focus back on Fed-ECB divergence

• Powell’s Senate testimony has put the focus back on the Fed-ECB policy divergence
• The EUR/USD technical studies have regained bearish bias, so the common currency could explore the downside today.

The EUR/USD created a bearish outside-day candle yesterday and also closed well below Monday’s low of 1.1676, putting the bears back into the driver’s seat.

The greenback picked up a bid after Fed’s Powell reiterated the gradual rate hike path view while noting the economy is nearing the cusp of “several years” of a strong labor market. More importantly, Powell’s hawkish stance puts the focus back on the Fed-ECB divergence. The European Central Bank (ECB) is not seen raising rates before the end of 2019.

Consequently, the common currency will likely report losses today. The monetary policy divergence may widen further in the EUR negative manner if the Eurozone June CPI is revised lower today.

Also, the technical studies have adopted a bearish bias – the 14-day relative strength index (RSI) has rolled over in favor of the bears, the pair created a bearish outside-day candle yesterday.

At press time, the EUR/USD pair is trading at a three-day low of 1.1645.

Daily chart

Spot Rate: 1.1645

Daily High: 1.1665

Daily Low: 1.1645

Trend: Bearish

Resistance

R1: 1.1674 (5-day MA)

R2: 1.1703 (50-day moving average)

R3: 1.1745 (previous day’s high)

Support

S1: 1.1613 (July 13 low)

S2: 1.1527 (June 28 low)

S3: 1.1510 (June 21 low)