01.08.201912:38 Forex Analysis & Reviews: EUR/USD below 1.1050 after Fed rate cut: August 1, 2019

EUR/USD moved downward quite impulsively after the Fed rate cut of 25 points which surprisingly empowered USD further against EUR.

The ECB is also going through a lot of struggles. It may decide to cut the interest rate and restart bond purchases but it could have negative impact on the economy. A decrease of rates into even further negative territory may hurt consumer confidence in the future. The region's protracted manufacturing-led slowdown has been driven by global uncertainties as the U.S. and China spar over trade policies. Besides, the plans for the U.K.'s exit from the European Union remain unclear. Last week, the ECB announced that it would study possible measures in the coming weeks, with most analysts penciling in a rate cut and a renewed round of quantitative easing for September. Moreover, EU governments have so far failed to rally behind a single candidate to replace Christine Lagarde atop the Washington-based IMF and the frustration is palpable across capitals.

Though the Federal Reserve has cut the interest rate recently, Jerome Powell said the move might not be the start of a lengthy campaign to shore up the economy against risks including global weakness. He also cited signs of a global slowdown, simmering U.S. trade tensions and a desire to boost too low inflation in explaining the central bank's decision to lower borrowing costs for the first time since 2008 and move up plans to stop winnowing its massive bond holdings. Powell clearly waited too long in his press conference to clarify that the Fed isn't limiting itself to a single, modest step. Markets understandably got hung up on his comment that this isn't the beginning of a long series of rate cuts.

Tomorrow, the non-farm employment change report is going to be published which is expected to decrease to 164k from the previous figure of 224k. Additionally, the average earnings are expected to remain unchanged at 0.2% while the unemployment rate is expected to decrease to 3.6% from the previous value of 3.7%.

As of the current scenario, the upcoming U.S. economic reports are quite mixed. The dovish expectation of the employment change report may lead to certain weakness on the USD side but after recent surprise blow to all USD sellers, the upcoming economic reports are expected to increase volatility and show some spikes along the way.

TECHNICAL OVERVIEW:

The price pushed quite impulsively lower and being quite far from the dynamic level, the price is expected to pull back higher towards 1.1200 area again before the bearish trend continues. There is a chance of a counter trend if the price manages to break above 1.1120 resistance area with a daily close. As the price remains above 1.10 area with a daily close, the pullback towards 1.1200 is highly expected.