Decent support lines up around 1.1000

• EUR/USD partially retraced its recent multi-day pullback.
• The greenback traded with decent losses following the soft data releases.
• The ECB matched the broad consensus and cut its monetary policy rates.

EUR/USD experienced fresh upward momentum on Thursday, reversing some of the recent losses and heading back towards the 1.1050 area, driven by fresh selling pressure on the US dollar (USD).

Meanwhile, the US dollar index ( DXY ) snapped a four-day streak of gains and succumbed to a fresh downtrend in response to weaker-than-expected prints from the weekly US labor market and producer prices in August. So far, the index seems to have encountered decent resistance around 101.80.

In addition, the further improvement in the risk complex also weighed on the greenback amid rising US and German yields.

Fresh strength in the single currency also came after the European Central Bank (ECB) cut its policy rates at its meeting on Thursday, as widely expected, although it did not provide any early guidance on the steps future

In fact, the ECB decided to ease monetary policy restrictions due to the Governing Council’s assessment of the inflation outlook and underlying dynamics. The bank did not explicitly suggest a rate cut in October, but noted that domestic inflation remained high.

At the subsequent press conference, President Christine Lagarde argued that the waning effects of monetary policy restrictions should support the economy, with inflation forecast to fall to 2% by 2025. However, she did not commit to any action in October and stressed that the policy would remain restrictive as long as necessary.

Overall, if the Fed proceeds with further or larger interest rate cuts, the policy gap between the Fed and the ECB could narrow over the medium to long term, potentially supporting EUR/USD. This is especially likely as markets anticipate two more interest rate cuts from the ECB this year.

In the long term, however, the US economy is expected to outperform the European economy, which could limit any prolonged dollar weakness.

Finally, according to the CFTC report for the week ended September 3, speculators (non-commercial traders) increased their net long positions in the euro (EUR) to their highest levels since January, while commercial traders (such as funds speculative) raised their net short positions to multi-month highs amid a notable increase in open interest.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the bulls take control, EUR/USD should hit an early resistance level at the September high of 1.1155 (September 6), before reaching the 2024 peak of 1.1201 (August 26) and the 2023 peak of 1.1275 (July 18).

The pair’s next downside target is the September low of 1.1001 (September 11), which is ahead of the preliminary 55-day SMA at 1.0948 and the weekly low of 1.0881 (August 8). The critical 200-day SMA is at 1.0861, ahead of the weekly low of 1.0777 (August 1) and the June low of 1.0666.

Meanwhile, the uptrend of the pair is expected to continue as long as it is above the important 200-day SMA.

The four-hour chart indicates a small resurgence of positive sentiment. That said, the initial resistance level is at the 100-SMA at 1.1091 backed by 1.1155 and 1.1190. Instead, there is immediate support around 1.1001 ahead of 1.0949. The Relative Resistance Index (RSI) advanced above 56.