EUR/USD Breaks Downtrend, Poised for Further Gains Amid Consolidation
The EUR/USD exchange rate has broken through its year-long downtrend and is poised for further gains. The pair has been trading above both the descending trendline that turned back every rally since February and the 200-day moving average, which it crossed decisively in mid-August.
Despite being overbought, with an RSI reading of 72.36 against a signal line at 63.17, analysts believe the pair needs to consolidate before extending its advance. The Relative Strength Index (RSI) indicates that the market is due for a pullback and consolidation ahead of continuation.
The Euro-to-Dollar forecast for the week ahead suggests a pause between 1.16299 and 1.17116, followed by a fresh attempt on 1.18. However, upside above 1.18 is limited, according to analysis from CIBC Capital Markets, due to elevated natural gas prices that remain a growth risk.
The European Central Bank's policy will be under scrutiny as the market watches data from Germany's IFO business climate survey and Spain's flash harmonised inflation reading for August. A stronger-than-expected print could lead to repricing beyond September, with a rate hike already fully discounted by markets.