On Wednesday, the EUR/USD pair rose near the 1.1350 mark, extending its winning streak for the third consecutive trading day. The major currency pair showed strength as the US Dollar (USD) continued to face strong selling pressure due to the decline in the United States’ (US) credit rating. Although the US Dollar Index (DXY), which tracks the value of the USD against six major currencies, recovered some of its losses from earlier in the day, it remained down 0.3% near 99.70.
On Friday, Moody’s downgraded the US Sovereign Credit Rating from Aa1 to Aaa due to concerns over the country’s fiscal imbalances and increasing interest rate obligations. This move raised concerns about the credibility of the US Dollar. The credit rating agency also expressed apprehension about the potential expansion of the current debt of $36 trillion, as US President Donald Trump is aiming to implement a new tax plan of $3 trillion to $5 trillion.
Meanwhile, President Trump failed to get support from Republican lawmakers in a closed-door meeting on Capitol Hill on Tuesday for his new tax plan, which is essential for his economic agenda. Republicans disagreed to support the tax-cut bill as they oppose the proposed increase in the limits on deductions for state and local tax payments, according to Republican Representative Mike Lawler, as reported by Reuters.
Investors are now waiting for the preliminary S&P Global Purchasing Managers’ Index (PMI) data for May, which will be released on Thursday. The PMI data is expected to show that the overall business activity remained stable. Investors will closely observe comments from private sector employers to see whether they are opting for capacity expansion or are comfortable with expensive imports due to the effects of the White House’s tariff policy.
According to Federal Reserve (Fed) officials, the implementation of new economic policies by President Trump is likely to destabilize inflation, which discourages the central bank from lowering interest rates. On Tuesday, St. Louis Fed Bank President Alberto Musalem stated that “If inflation expectations become de-anchored, the Fed policy should prioritize price stability.” He also noted that the monetary policy is currently in a good position as uncertainty around economic policy remains high.
EUR/USD continued to rise on Wednesday, reaching its highest level in two weeks near 1.1350. The pair’s short-term outlook is bullish as it remains above its 20-day Exponential Moving Average (EMA) around 1.1240. The 14-period Relative Strength Index (RSI) is currently trading in the 40.00-60.00 range, reflecting the indecisiveness among traders.
In terms of resistance, the key level to watch is the high from April 28 at 1.1425. On the other hand, the psychological support level of 1.1000 will be crucial for Euro bulls.