EUR/USD logs three-day losing streak, focus on Powell’s testimony and Fed minutes
- EUR/USD drops for three straight sessions on broad-based USD rally.
- Deeper losses could be seen if Fed’s Powell sounds less dovish-than-expected.
EUR/USD fell 0.10% on Tuesday, confirming a three-day losing streak, the first since mid-June.
The recent losses could be associated with the better-than-expected US non-farm payrolls data released on Friday and the resulting fears that Federal Reserve’s (Fed) Chairman Jerome Powell may rein in market expectations for a July rate cut.
The dismal German factory activity data released on Monday and Tuesday also played a role in pushing the EUR lower.
Powell’s testimony at 14:00 GMT
Fed’s Powell is scheduled to testify in front of the House Financial Services Committee on Wednesday.
Markets seem to have scaled back expectations of aggressive Fed rate cuts over the last three days. This is evident from Dollar Index's 100 pip rally since Friday.
Investors, however, are still expecting the central bank to cut rates by 25 basis points later this month, meaning there is plenty room for rally in the US Dollar if Powell sounds less dovish-than-expected, forcing markets to price out the July rate cut.
EUR/USD, however, will likely regain poise if Powell reinforces rate cuts expectations. That said, a break above the recent high of 1.1412 is needed to confirm a bullish reversal.
FOMC minutes at 18:00 GMT
The minutes of Federal Reserve’s June meeting will most likely be dovish but will have little impact on the US dollar if Powell’s testimony is laced with optimism.
As of writing, EUR/USD is trading at 1.1207, having hit a three-week low of 1.1193 on Tuesday. The 4-hour chart shows the pair has created a falling wedge. A breakout, if confirmed, would open the doors for minor bounce ahead of Powell’s testimony.
Technical levels