EURUSD strengthens amid geopolitical stabilization and expectations of Fed rate cuts

Easing geopolitical tensions had a positive impact on the EURUSD dynamics. Markets saw the fragile truce in the Middle East as a sign of lower geopolitical risks, which boosted demand for riskier assets and weakened the dollar. The exchange rate climbed higher than the resistance level of 1.16000, with Wednesday's opening price at 1.16033.

The US dollar is losing momentum as Treasury yields drop and expectations for the Fed to ease monetary policy grow. Plunging oil prices following the Middle East de-escalation have reduced inflationary risks, fueling speculation about earlier interest rate cuts. Moreover, deteriorating consumer confidence in the United States supports these projections and increases pressure on the dollar.

Foreign investor actions are making these factors even stronger as they're rethinking the risks of investing in dollar assets. European pension funds have reduced their dollar holdings to the lowest level since 2022, while Asian traders are taking profits in the Treasury bond market, fearing the dollar's vulnerability due to rising US government debt and uncertainty surrounding Fed policy.

At the same time, the euro is receiving support from improved economic prospects in the eurozone, particularly in Germany. The approved federal budget, with increased spending on defense and infrastructure, is boosting optimism among businesses and investors. This week’s data showed that the Ifo index rose to 90.7 points confirming the gradual recovery of business activity in the region.

The EURUSD daily chart indicates a moderate uptrend with potential for further growth. The MACD points at a slower pace, which may signal a possible correction or consolidation phase. However, the RSI is at 69, indicating no overbought conditions. At the same time, the lack of clear divergence between price and RSI confirms the relevance of the uptrend.

The resistance level is located at 1.16400, while the nearest support level is at 1.14900. If the price successfully consolidates above the resistance level of 1.16400, further growth can be expected with a potential target of 1.16800.

Current recommendation:

Buying during a correction near 1.15000–1.15780. Take profit — 1.16800. Stop loss — 1.14900.