Significant Drop in EURUSD 📉

Comments from Thomas Barkin of the Fed indicated that the US economy remains very strong, especially compared to other countries. Even if a recession occurs, it will likely be shallow. Barkin emphasized that Americans' credit card debt should not be a concern and has returned to pre-pandemic trends. Additionally, investors are slowly starting to price in the chance of another 'hawkish performance' by Powell on Friday (keeping in mind the year 2022) - a strong USD seems to be draining energy from the EUR.

• The Richmond Fed reading showed a slight improvement in the US industry, supporting previous regional industrial indices that are rebounding from a period of weakness. US home sales were slightly below forecasts, falling at a rate of 2.2% year-on-year compared to 3.3% previously - the market expected only a 0.25% drop. Yields on 10-year inflation-indexed treasuries rose above 2% for the first time since 2009.

• Today, the euro is one of the worst-performing currencies among developed countries. The EURUSD currency pair is down 0.50% and is approaching a key support zone. The dollar remains fairly stable, suggesting that the EURUSD's weakness is mainly due to selling pressure on the euro.

• This week lacks significant macroeconomic data except for tomorrow's PMI data release, which could significantly affect the dollar's exchange rate. Markets are more focused on Jerome Powell's Friday conference at the Jackson Hole symposium, where key hints from central bankers about interest rate policy in the coming months are expected.

EURUSD has slipped below 1.085, where sellers took control, and the pair is currently testing around 1.084. Looking at the momentum from the perspective of 100 and 200 session averages (SMA100 and SMA200, black and red colors), we see that previous technically similar situations brought a rebound, which, of course, will not determine the future EURUSD rate but can be seen as a signal of medium-term advantage for buyers. Higher volatility may occur on Friday when Fed Chairman Powell speaks - hawkish comments may support sellers and lead to a retest of 1.06, where we see a 38.2% Fibonacci retracement. In the short term, the 23.6% Fibonacci retracement of the autumn 2022 bullish wave has turned from support to resistance. Source: xStation 5