EUR/USD Forecast: The 200-day SMA holds the downside…for now

The US Dollar (USD) regained further upside impulse on Tuesday, prompting the USD Index (DXY) to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world.

EUR/USD met a decent resistance near 1.0860 so far. The decent recovery in the Dollar kept the pair under pressure. Chief Powell’s testimony fell on the cautious side. The US Dollar regained further upside impulse on Tuesday, prompting the USD Index to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world. This recovery in the Greenback triggered extra selling pressure on EUR/USD, pushing it back to the 1.

The ECB's rate cut in June, combined with the Fed's decision to maintain rates, has increased the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term. However, the prospects of economic recovery in the Euroland, coupled with the perceived cooling of some key US fundamentals, may mitigate this disparity and occasionally support the pair in the near future.

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