The Euro has risen by 0.5% against the US Dollar, aligning with other G10 currencies as the US Dollar weakens. Technical indicators point to a positive trend, with aggressive easing from the Federal Reserve likely boosting the Euro. Interest rate differences between central banks are shrinking, supporting the Euro’s rise. Germany’s final Consumer Price Index (CPI) for July holds steady at 2.0% year-on-year, matching initial estimates.

The Recent Euro Ascent

The Euro’s recent rise almost completely recovers its drop from late July, nearing multi-year highs. Momentum is strong, but the Relative Strength Index (RSI) is below the overbought level of 70. This indicates a possible trading range between support at 1.1650 and resistance at 1.1750. During European trading, the EUR/USD surpasses 1.1700 as the US Dollar weakens due to speculation about rate cuts from the Federal Reserve. Similarly, the GBP/USD also climbs past 1.3550, fueled by a positive market sentiment. Gold is facing challenges in gaining momentum as safe-haven demand decreases, even with a generally positive outlook. Anticipation of a Federal Reserve rate cut is weighing on the US Dollar, which in turn affects gold pricing. AI tokens are gaining popularity, with top performers including Bittensor, Near Protocol, and Render, following Perplexity’s interest in Google Chrome. Additionally, the Bank of England has lowered rates by 25 basis points, reflecting concerns over persistent inflation.

US Dollar Weakness and Euro Strength

With the US Dollar losing value, we expect the EUR/USD pair to maintain its strength in the coming weeks. Anticipated rate cuts by the Federal Reserve are closing the interest rate gap with the European Central Bank, which supports the Euro’s strength. We recommend buying call options on EUR/USD with strike prices above 1.1700. Our outlook is backed by recent data showing US core inflation falling to 2.1% and a cooling labor market, as unemployment in July rose to 4.2%. This trend makes it likely that the Federal Open Market Committee will cut rates in September, further pressuring the US Dollar. Meanwhile, with Eurozone inflation steady at 2.1% for July, the European Central Bank has little motivation to make cuts just yet. The technical analysis supports this upward trend, as the RSI remains below the overbought level, indicating potential to rise toward the 1.1750 resistance. We observed a similar situation in 2019, where a patient ECB and a cutting Fed provided support for the Euro. This historical context suggests that the current trend could continue for several weeks, although we will watch the 1.1650 support level closely. While the British Pound is also gaining against the US Dollar, the Bank of England’s recent 25 basis point rate cut raises some caution. Lowering rates amid July inflation at 2.8% indicates serious worries about economic growth, which might limit the Pound’s strength compared to other currencies. Thus, we suggest considering a long position in EUR/GBP, as the Euro’s stable policy is likely to outperform. For gold traders, the current situation is challenging despite the declining US Dollar. A strong risk-on feeling in the market is boosting equities and currencies, which lowers the need for safe haven assets. This means that just betting against the dollar might not guarantee profits for gold, and investors should be cautious about expecting gold to break out significantly. In a different area, the momentum in AI-related tokens like Bittensor and Near Protocol offers a high-risk opportunity. This rally is driven by news in the industry, not broader central bank trends. For those willing to take risks, this niche could lead to short-term gains, but it does not align with our main forex strategy. Create your live VT Markets account and start trading now.

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