Australia Exchange foreign exchange trading reminder: beware of breaking the market! Analysts say the euro may face continued selling pressure in the short term

Valeria Bednarik, chief analyst of the well-known financial website FXStreet, wrote on Friday (September 22) that this week the Federal Reserve has suspended interest rate hikes and the dollar has reasserted its dominance.The decline in the EUR/USD has not yet ended, and it is likely to break below the 1.0600 mark in the short term.

The ICE Dollar Index, which tracks the greenback against six major currencies, rose 0.27 percent last week to close at 105.62. The dollar index has closed higher for ten consecutive weeks, the longest winning streak in nearly a decade.

Bednarik said that as investors continue to bet on the strengthening of the dollar, the euro/dollar maintained a bearish path, touching as low as 1.0614 on Friday. Last week, the euro/dollar closed at 1.0642.

The US FOMC (FOMC) announced last Wednesday that it will maintain the federal funds rate at the target range of 5.25% -5.50%, which is in line with market expectations and forecasts that interest rates will reach a peak of 5.50% -5.75% this year, that is, before the end of the year, there will be another 25 basis points.

According to the latest dot plot released by the Federal Reserve in September, the median interest rate forecast for the end of this year remains at 5.6%, suggesting another rate hike this year. In addition, compared with the dot plot in June, policymakers predict that interest rates will only be cut by 50 basis points in 2024. The room for rate cuts is smaller than the June forecast, indicating that interest rates will remain high for longer than originally expected.

In a post-meeting press conference, Fed chairperson Jerome Powell said officials would decide rates "meeting by meeting" and were ready to raise rates further in due course, with most policymakers believing another rate rise this year was more likely to be appropriate.

Bednarik said the Fed's statement benefited the dollar as investors were spooked and sought safety in the safe-haven dollar, which was trading around 1.0730 before the Fed's decision before falling more than 100 points at one point.

EUR/USD latest technical outlook analysis

Bednarik pointed out that the EUR/USD closed lower for the tenth consecutive week and continued to show a downward trend of lows, suggesting that there will be continued selling pressure in the coming trading days.So far, the corrective rally has not lasted long.

Bednarik said that the EUR/USD weekly chart shows that the bearish 100-week simple moving average (SMA) constitutes dynamic resistance, maintaining its bearish slope around 1.0730.Meanwhile, the 20-week SMA gained bearish traction above the 100-week SMA, in line with continued selling interest. Meanwhile, the momentum indicator was solidly downwards in negative territory, while the relative strength index (RSI) consolidated around 41, skewing the exchange rate risk to the downside.

On the daily chart, Bednarik said that the EUR/USD is trading below all its moving averages, and the 20-day SMA continues its sharp decline below the longer-term averages, currently at 1.0737, strengthening this resistance area. The momentum indicator resumed its decline below 100, while the RSI continued to move lower near 36, favoring the EUR/USD below the 1.0600 mark.

(EUR/USD daily chart)

The next bearish target and support level for EUR/USD is 1.0515, the March low; once below this level, EUR/USD could fall further towards the 1.0420/40 area. On the upside, the 1.0730 area constitutes strong resistance, and a breakout of this area would allow EUR/USD to target 1.0800.