EURUSD is set up for another bullish momentum

EURUSD is set up for another bullish momentum

EURUSD continued to move within 1.09000–1.09500 on Wednesday, losing 0.07%. Meanwhile, the U.S. Dollar Index (DXY) has been gearing towards the 103.500 resistance level, gaining 0.25%.

👉 Possible effects for traders

The recent rise of the euro (EUR) can be attributed to the anticipated divergence in the monetary policy path between the Federal Reserve (Fed) and the European Central Bank (ECB). Given that the ECB started reducing rates earlier than the Fed, market participants now expect that the Fed may have to deliver more substantial rate cuts in the near future. The Fed is projected to lower rates by approximately 105 basis points (bps) by the end of the year compared to a 64-bps reduction from the ECB, based on Refinitiv data.

Moreover, the recent eurozone inflation data suggests that the ECB may refrain from a cut in September, further deepening the divergence between the two central banks. According to an ING analyst, Francesco Pesole, there is a clear bias that the ECB will deliver 50-bps reductions rather than 75-bps rate cuts at the next three meetings before the end of the year. Overall, demand for EURUSD could increase if it holds above 1.09000 over the next few days.

EURUSD has been moving bullish during the Asian and early European trading hours. Today's U.S. Jobless Claims report will be the main focus for investors. A number exceeding the forecast could drive EURUSD towards 1.10000, whereas a weaker-than-expected one could push the euro back towards the 1.09000 support level.