The Euro slipped to near-term lows against the US Dollar as risk-off markets favored the Greenback. European markets will be mostly closed on Wednesday, with the focus shifting to the Federal Reserve’s midweek rate call. The unexpected increase in US wages growth raised concerns about inflation, leading to a decrease in rate cut expectations and prompting investors to seek safe haven assets.
On Tuesday, the EUR/USD pair dropped below the 1.0670 level, driven by US economic data showing rising housing prices and wage costs for businesses. The Federal Reserve is expected to keep rates steady, but investors are eager for clearer policy guidance amid worries about inflation and economic growth.
Market sentiment has been affected by a potential scenario of high inflation and slow economic growth, which could limit the Fed’s ability to cut rates as quickly as previously anticipated. Rate markets now predict only one quarter-point rate cut from the Fed this year, with uncertain prospects for further cuts in the near future.
From a technical perspective, EUR/USD is trading below the 200-hour Exponential Moving Average (EMA) and is nearing a supply zone around 1.0660. The pair is approaching April’s low near the 1.0600 level, down approximately 2% from its recent high at 1.0885.
Charts show the downward trend in both the hourly and daily EUR/USD charts, reflecting the current bearish sentiment in the market. Investors will be closely monitoring the Federal Reserve’s rate decision for any clues on future monetary policy direction.