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Market update: Euro lifted slightly by US downgrade

EUR/USD rose a bit after US rating downgrade; however, growth differentials remain in favour of USD, limiting EUR/USD’s rise for now.

Source: Bloomberg

The euro appears to be slightly supported after Fitch Ratings downgraded the United States’ long-term foreign currency issuer default rating to AA+ from AAA. Still, monetary policy and growth differentials suggest the single currency is unlikely to benefit much from Wednesday’s early lift, at least in the near term.

EUR/USD: Consolidation could continue

Both central banks, the US Federal Reserve, and the European Central Bank are in wait-and-watch mode with regard to further tightening, leaving very little monetary policy advantage from a relative perspective. From an absolute perspective, higher US rates clearly stand out.

However, growth differentials appear to be in favour of the US, arguing for a softer EUR/USD. The US economic surprise index is at its highest level since 2021, while the Euro Area economic eurprise endex is at its lowest level since 2020.

EUR/USD’s recent softness could extend a bit further given the stiff hurdle on the 200-week moving average. As highlighted in a previous update, the near-term bias appears to be of consolidation within a broadly constructive outlook. Only a fall below 1.0500-1.0600, including the early-2023 lows, would pose a threat to the broader uptrend.

EUR/USD weekly chart

Source: TradingView

EUR/AUD: Broader bullish trend reaffirmed

EUR/AUD has turned higher from near quite strong support at the mid-July low of 1.6230. From a short-term perspective, the trend is at best sideways. However, from a medium-term perspective, the trend is up given the higher-top-higher-bottom sequence since late 2022.

The top end of the range is the April high of 1.6800, while the immediate support is at 1.6230.

EUR/AUD weekly chart

Source: TradingView

EUR/NZD: Boxed in a range

The price action in recent weeks gives very little sense of direction, being boxed in a 1.7200-1.8100 range. Still, within the choppy range, EUR/NZD continues to hold above the crucial floor on the 89-day moving average.

Zooming out, though, on the monthly charts, the break this year above the 2022 high of 1.7500 keeps the broader bullish bias intact.

EUR/NZD monthly chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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