Powell and Lagarde Provide Volatility | Daily Market Analysis

Key events:
Eurozone - Euro Summit 
Canada - Employment Change (Aug)
Canada - Unemployment Rate (Aug)          

The EUR/USD pair traded above 1.0000 in anticipation of the European Central Bank's monetary policy decision as demand for the dollar remained subdued. During the first half of the day Asian and European stocks struggled to continue rising, although most indices held on to most of their intraday gains. At the same time, government bond yields remained at the lower end of their weekly range.

The European Central Bank raised rates by 75 basis points, as expected. The deposit rate was adjusted from 0% to 0.75% and the main refinancing rate was raised to 1.25%. The central bank revised upward its inflation forecasts to an average of 8.1% in 2022, 5.5% in 2023, and 2.3% in 2024. Policymakers also expect the economy to continue to grow despite signs of a recession, with annual GDP rising 3.1% in 2022, 0.9% in 2023, and 1.9% in 2024. Moreover, the statement suggests that further rate hikes are not far off.

Meanwhile, the U.S. released initial jobless claims for the week ended September 2, which fell to 222,000, beating market expectations. ECB President Christine Lagarde quickly started the press conference, and US Federal Reserve Chairman Jerome Powell spoke before Wall Street opened.

EUR/USD Short-Term Technical Forecast

The EUR/USD chart technical analysis

The EUR/USD has retreated from the intraday high of 1.0029 and is now struggling to maintain parity. The bullish potential remains limited, according to the daily chart, as the pair is facing intraday sellers around the moderately bearish 20 SMA, which accelerated its fall below the longer moving averages. The momentum indicator rose and the RSI indicator is consolidating around the 56 mark, which indicates that the buyers' interest is weakening.
In the near term, according to the 4-hour chart, the risk is shifted to the upside. The pair is advancing above its 20- and 100-day SMAs, with the shorter one gaining strength below the longer one. Technical indicators, meanwhile, have resumed their advance within positive levels.

Support levels: 0.9995 0.9950 0.9910
Resistance levels: 1.0040 1.0085 1.0120