- EUR/USD has found acceptance below key support levels.
- The USD is broadly bid on fears Powell may disappoint doves.
EUR/USD has found acceptance below key support levels with the US dollar broadly bid ahead of the US Federal Reserve Chairman Jerome Powell’s testimony to Congress.
To start with, the pair closed below 1.1223 on Monday, marking a downside break of the crucial 61.8% Fibonacci retracement of the rally from 1.1107 to 1.1412.
Further, the sellers have successfully breached the 50-day moving average (MA), which is now lined up as resistance at 1.1237.
And last but not the least, the currency pair is trading well below the rising trendline connecting May 30 and June 18 lows.
All-in-all, the common currency is on the defensive ahead of Powell’s testimony (due at 12:45 GMT), mainly due to expectations that Fed’s Powell may rein in expectations for aggressive Fed rate cuts and partly due to recent string of dismal German data.
Friday’s upbeat US non-farm payrolls eased concerns the economy was heading for a recession. Further, the US-China trade truce has created room for the Fed to hold fire. As a result, Powell may sounds less dovish-than-expected, pushing both treasury yields and the US Dollar higher.
The greenback, however, will likely take a beating if Powell reinforces bets of aggressive rate cuts. That said, the bearish technical setup in EUR/USD would be invalidated only if the spot rises above Friday’s high of 1.1288.
As of writing, EUR/USD is trading at 1.1212.