EUR/USD ANALYSIS EUR/USD has been falling on a sustained basis since mid-July more or less. This downward trend has been primarily driven by the contrasting economic performance of the United States and the Euro Area, alongside disparities in the monetary policies pursued by their respective central banks, with this divergence pushing U.S. Treasury yields to multi-year highs across maturities in recent days. Presently, the Federal Reserve's benchmark rate stands at an impressive 5.25%-5.50%, well ahead of the European Central Bank’s deposit facility rate of 4.0%. This gap could widen further in the coming months, as U.S. borrowing costs could rise by another 25 basis points in 2023, while those across the Atlantic could remain unchanged, with the ECB having signaled that the tightening campaign is over. Although investors harbor doubts that the Fed will hike again this year, the market's assessment could change if U.S. macro data stays hot. For this reason, traders should closely watch next week's U.S. personal consumption expenditure figures for August. Any indication that the U.S. consumer continues to spend strongly and that price pressures remain sticky should be bullish for the U.S. dollar. Search Search Free Trading Guides Subscribe to Our Newsletter Market News Analysis Currencies Commodities Stocks Crypto Tools Calendars Education About Us English EUR/USD BULLISH OIL - US CRUDE BEARISH More NEWS (3/6): Well, if we compare housing jobs to where existing home sales were 6 quarters ago (that's right, 1.5 years ago), the pictur... (6/6): Yes, there are a whole lot of factors that go into NFP real estate And we are not considering those here But just on this... Inflation Monetary Policy More Euro Forecast: EUR/USD on Breakdown Watch, EUR/GBP Stuck in No Man’s Land For Now Euro Forecast: EUR/USD on Breakdown Watch, EUR/GBP Stuck in No Man’s Land For Now Sep 23, 2023 10:00 AM +01:00 Diego Colman, Contributing Strategist Share: What's on this page Trade Smarter - Sign up for the DailyFX Newsletter Receive timely and compelling market commentary from the DailyFX team Subscribe to Newsletter EUR/USD ANALYSIS EUR/USD has been falling on a sustained basis since mid-July more or less. This downward trend has been primarily driven by the contrasting economic performance of the United States and the Euro Area, alongside disparities in the monetary policies pursued by their respective central banks, with this divergence pushing U.S. Treasury yields to multi-year highs across maturities in recent days. Presently, the Federal Reserve's benchmark rate stands at an impressive 5.25%-5.50%, well ahead of the European Central Bank’s deposit facility rate of 4.0%. This gap could widen further in the coming months, as U.S. borrowing costs could rise by another 25 basis points in 2023, while those across the Atlantic could remain unchanged, with the ECB having signaled that the tightening campaign is over. Although investors harbor doubts that the Fed will hike again this year, the market's assessment could change if U.S. macro data stays hot. For this reason, traders should closely watch next week's U.S. personal consumption expenditure figures for August. Any indication that the U.S. consumer continues to spend strongly and that price pressures remain sticky should be bullish for the U.S. dollar. Hone the skills that lead to trading consistency. Grab your copy of the "How to Trade EUR/USD" guide, featuring priceless insights and tips from our team of experts! How to Trade EUR/USDHow to Trade EUR/USD RECOMMENDED BY DIEGO COLMAN How to Trade EUR/USD Get My Guide KEY US ECONOMIC DATA NEXT WEEK image1.png Source: DailyFX Economic Calendar From a technical analysis perspective, EUR/USD has anchored itself to a support region surrounding a key Fibonacci level at 1.0610 after its recent retracement. Although this zone may offer robust protection against further losses, a breach could unleash substantial downward pressure, paving the way for a descent towards 1.0570, followed by 1.0500. On the flip side, if buyers unexpectedly reassert their dominance in the market and spark a bullish turnaround, initial resistance can be spotted in the 1.0760/1.0785 range, as shown in the accompanying chart below. Upside clearance of this barrier could boost upward momentum, setting the stage for a rally toward the 200-day SMA at 1.0830. On further strength, the focus shifts to 1.1025.