EUR/USD – Bulls Defend Crucial 1.1600 Support; Near-Term Resistance at 1.1660 Remains Intact
EUR/USD displayed notable resilience during Tuesday’s trading session, managing a modest recovery despite escalating political tensions between U.S. President Donald Trump and the Federal Reserve. The currency pair closed approximately 0.2% higher, reaffirming the significance of the critical support at the psychological 1.1600 level. This support, notably the reaction point following Fed Chair Jerome Powell’s recent Jackson Hole comments, has effectively contained downside pressures thus far.
From a fundamental standpoint, EUR/USD’s price action remained relatively composed amid ongoing political developments. The intensifying Trump-Fed feud, highlighted by Trump’s latest move to dismiss Fed Governor Lisa Cook, triggered initial U.S. dollar weakness. However, the overall market response to this development has been surprisingly subdued, reflected in EUR/USD’s tepid but steady ascent. Meanwhile, potential risks from French political developments have had minimal lasting impact on the euro, evidenced by the limited widening in French-German bond yield spreads, significantly less pronounced compared to similar episodes last year.
From a technical perspective, EUR/USD faces a clearly defined immediate resistance at the 200-hour moving averages clustered closely between 1.1650 and 1.1660. Throughout the session, the pair repeatedly tested and failed to breach this critical short-term dynamic resistance, underscoring its technical significance as a barrier to near-term bullish continuation.
Momentum indicators, while somewhat neutral, display cautiously bullish signs. The hourly RSI has steadied above neutral territory, suggesting modest bullish momentum building at current levels. On the daily charts, RSI remains in neutral-to-bullish territory, hinting at the potential for additional upside should the short-term resistance at 1.1660 be overcome decisively.
Immediate technical support remains firmly anchored at the critical 1.1600 level, reinforced significantly by the market’s recent response following Powell’s Jackson Hole speech. A break below this support level would represent a meaningful bearish development, exposing subsequent downside support at the August 22 low near 1.1582. Should the pair close decisively beneath this secondary support, it could pave the way for a deeper technical retracement towards stronger support near the psychologically important 1.1500-1.1520 area.
It is important to note that month-end corporate flows, especially into Wednesday’s London 4pm fix, typically favor short-term dollar strength, potentially capping EUR/USD’s immediate bullish attempts. As a result, traders should remain vigilant to potential short-term pullbacks toward the noted key supports (1.1600 and 1.1582).
Looking forward, traders should closely monitor EUR/USD’s reaction at immediate resistance around 1.1650-1.1660. A confirmed breakout above this resistance cluster would significantly enhance the short-term bullish outlook, initially targeting recent session highs near 1.1720-1.1750. Conversely, failure to breach these resistances, combined with month-end USD flows, could drive a retest of 1.1600 support, reaffirming a near-term consolidation phase for EUR/USD.