The Euro (EUR) has come under sustained downward pressure against the US Dollar (USD), trading just above monthly lows near 1.1520 after four consecutive days of depreciation, as investors anticipate the first US Federal Reserve (Fed) interest rate hike in three years [1][2]. The EUR/USD pair fell sharply below the key support at 1.1565, reaching 1.1522, with UOB analyst Quek Ser Leang projecting further downside toward 1.1490 if resistance at 1.1600 remains unbroken [2]. The Euro closed 0.44% lower at 1.1547, and market sentiment remains negative, with the next support at 1.1490 unlikely to be threatened in the immediate term [2].
Economic data released by the ZEW Institute showed that German Economic Sentiment edged up to 34.7 in September from 34.2 in August, but missed market expectations of 37 [1][3]. The Current Situation index improved significantly to -47.1 from -61.1, beating the expected -52.2, though it remains in negative territory [1][3]. For the broader Eurozone, sentiment deteriorated, with the ZEW Survey Economic Sentiment falling to 25.8 in September from 31.4, well below the anticipated 39.9 [3]. ZEW President Achim Wambach described sentiment as 'broadly stable' and experts as 'cautiously optimistic,' citing fiscal measures and export momentum as supportive, but warning of risks from persistently high energy prices and uncertainty caused by hybrid attacks [1][3].
Eurostat reported a July trade surplus of EUR 14.2 billion, surpassing expectations of EUR 3.7 billion and improving on a downwardly revised EUR 7.2 billion surplus in June [1]. Despite this positive trade data, the Euro failed to gain traction, as mixed sentiment and ongoing risks weighed on investor confidence [1].
On the US Dollar side, the currency remains buoyed by rising bets on a Fed quarter-point hike, supported by higher oil prices, elevated US Treasury yields, and a soft risk environment [1][4]. ING analyst Francesco Pesole expects the Dollar to consolidate in the near term, with potential for further appreciation after the FOMC verdict [1]. OCBC strategist Christopher Wong notes the US Dollar Index (DXY) at 99.5, supported by Brent crude above $108/bbl and the 10-year UST yield crossing 5%, with resistance at 99.80–100.30 and support at 99.30–98.00 [4]. Wong adds that further USD upside likely requires the Fed to keep open the option of additional tightening, and two-way risks are expected to persist [4].
Market reaction has been swift, with EUR/USD trading around 1.1535, down 0.12% on the day, as the Euro remains depressed and the Dollar holds firm on multiple supports [3][4].
CONCLUSION
The Euro continues to weaken against the US Dollar, pressured by disappointing sentiment data and robust USD strength ahead of the Fed's anticipated rate hike. Despite a strong Eurozone trade surplus, market sentiment remains negative, and analysts expect further downside for EUR/USD unless resistance levels are breached. The US Dollar is supported by high oil prices, elevated yields, and Fed hike expectations, with further gains contingent on continued hawkish signals from the Fed.