EUR/USD drifts toward key support as dollar strength keeps pressure on euro
EUR/USD remains under pressure as investors continue to favor the U.S. dollar ahead of another busy week of macroeconomic releases. The ECB kept interest rates unchanged after its June hike while maintaining a data-dependent approach, whereas markets continue to assess the possibility that the Federal Reserve could keep monetary policy restrictive for longer if inflation remains elevated.
Higher Treasury yields and resilient U.S. economic data continue to underpin the dollar.
Geopolitical tensions in the Middle East also remain an important driver. Elevated energy prices increase inflation risks for the euro area while simultaneously supporting safe haven demand for the U.S. dollar. As a result, the interest rate differential continues to favor the greenback, limiting the euro's recovery attempts.
Technical picture points to growing downside pressure
The chart suggests that sellers remain in control. EUR/USD continues to trade below its key medium-term moving averages while every rebound toward the 1.1400 to 1.1430 area continues to attract fresh selling interest. The pair is gradually approaching the major support zone around 1.1330, which has repeatedly attracted buyers in recent weeks.
This support remains technically significant, and another buying attempt from this area is possible. However, unlike previous tests, downside pressure has intensified, increasing the probability of a decisive break. A sustained move below 1.1330 would expose the pair to a deeper decline toward 1.1300 and potentially 1.1270. On the upside, only a recovery above 1.1400 would ease immediate bearish pressure, while a break above 1.1430 would improve the short-term outlook.
Markets await next macro catalysts
The next direction for EUR/USD will likely depend on incoming U.S. macroeconomic data, including GDP, inflation and labor market releases, together with any changes in Federal Reserve expectations. In Europe, investors will closely monitor inflation indicators and ECB communication for clues on whether another rate increase remains likely later this year. Until then, as I noted in EUR/USD holds below key resistance as Fed outlook and Middle East risks cap recovery, the combination of stronger dollar demand, geopolitical uncertainty and cautious risk sentiment continues to favor sellers.
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