## EUR/USD Pair Falls to New Lows: Strong Dollar and Weak Euro Sentiment

The EUR/USD pair declined significantly on Wednesday, dropping by 0.66% to trade at 1.1738, after opening the session at 1.1819. This decline comes following Federal Reserve Chair Jerome Powell's comments showing caution regarding rushing to cut interest rates, which boosted demand for the US dollar.

## US Economic Data Supports the Dollar Amid Expectations of Limited Cuts

US housing data showed a noticeable improvement, with new home sales in August rising by over 20%, from 0.664 million to 0.8 million units, surpassing the forecast of 0.65 million. This strength in the housing sector reflects support for the US dollar after a week of weakness in global PMI indicators.

Powell emphasized that the Federal Reserve will remain balanced in its approach to the dual mandate, with inflation risks tilted upward and employment risks tilted downward. He described current monetary policy as "moderately hawkish" but "well-positioned" for upcoming economic developments. Despite market expectations of at least two rate cuts before the end of the year, Powell's cautious hints reduced the likelihood of rapid successive cuts.

## Dollar Index Rises and Eurozone Central Bank Remains Neutral

The US Dollar Index DXY rose by 0.66% to 97.85, reflecting the dollar's value against a basket of six major currencies. Meanwhile, the European Central Bank announced its intention to keep interest rates steady, especially after ECB President Christine Lagarde indicated that "the process of reducing inflation may have ended," implying no pressure on the bank to implement additional cuts soon.

## Germany and France Add Negative Pressure on the Euro

The German IFO Business Climate Index for September signaled a warning, falling to its lowest in four months, from 89 to 87.7, below the forecast of 89.3. This was reflected in the current assessment dropping to 85.7 from 86.4, indicating companies' dissatisfaction with the current economic situation. Business expectations also declined from 91.6 to 89.7, well below the expected improvement to 92.

Additionally, French Prime Minister Élisabeth Borne announced plans to impose additional taxes on high-income individuals and corporations, raising concerns about potential economic growth in France and adding further pressure on euro forecasts.

## Federal Reserve Speakers Paint a Different Picture

St. Louis Fed President James Bullard expressed reservations about a series of rate cuts, noting that the labor market remains stable and strong overall. He warned against over-relying on the assumption that inflation is merely temporary. Conversely, San Francisco Fed President Mary Daly said that further policy adjustments are likely needed as the Fed works to balance price stability with supporting the labor market.

## Upcoming Events That Could Move the Market

In the coming days, traders are watching several key economic reports: initial jobless claims for the week ending September 20 with an estimate of 235,000(, worse than the previous 231,000); durable goods orders expected to improve by -0.5% after July's decline of 2.8%; and the final Q2 GDP reading expected to remain at 3.3% annually.

In Europe, the GfK Consumer Confidence Study for Germany in October will be released. The probability of the Federal Reserve cutting interest rates by 25 basis points at the October 19 meeting is 91%, according to futures market data.

## Technical Analysis: EUR/USD Under Downward Pressure

Technically, the EUR/USD pair maintains an overall bullish trend, but a "Evening Star" pattern is forming as a potential reversal signal. Closing Wednesday below the 1.1750 level opens the door to additional downside pressure. The RSI indicator shows a neutral stance, while sellers appear to be gaining momentum in the short term.

If the price breaks below 1.1700, the first support will be at the 50-day simple moving average at 1.1678, followed by the 100-day moving average crossing near the August 27 low around 1.1560–1.1584. On the upside, if buyers regain control, the pair may test 1.1800 first, then 1.1850 before approaching the yearly high at 1.1918.

## Why is EUR/USD Important for Global Traders?

The EUR/USD pair accounts for about 30% of all foreign exchange transactions, making it the most traded currency pair globally. The euro trades against the dollar with an average daily volume exceeding $2.2 trillion, reflecting its importance as a proxy for the European economy versus the US economy.

The euro is primarily influenced by the European Central Bank (ECB), which makes monetary policy decisions at eight annual meetings. Led by President Christine Lagarde, the ECB aims for price stability and maintains an inflation target around 2%. Economic data such as purchasing indicators, GDP, and employment—especially from the four largest European economies(Germany, France, Italy, and Spain, which constitute 75% of the European economy)—play a crucial role in guiding the euro's value.

Relative interest rates between the Eurozone and the US provide a fundamental driver for the pair's movement. Higher interest rates typically attract more foreign investment, supporting the currency's value. Conversely, a trade surplus boosts the currency due to external demand for exports, while a trade deficit exerts downward pressure.