What Traders Should Watch as EUR/USD and Silver Surge Amid Weak US Dollar

EUR/USD Hits Yearly High, Silver Reaches 5-Month Peak Amid Weakening US Dollar

The EUR/USD currency pair reached a yearly high of 1.1215 before retreating by around 80 pips, driven by stronger-than-expected US home sales data. Similarly, XAG/USD benefited from the weaker dollar, hitting a 5-month peak at $32.50.

Fundamental Analysis

As we approach the end of the month and quarter, market volatility is expected. The US dollar and bond yields may attempt to regain ground, but the Federal Reserve’s dovish stance, with plans to cut interest rates by 50 basis points (bps) in 2024, could keep the dollar under pressure. This narrowing of the interest rate gap between the ECB and the Fed opens the door for Euro buyers. Additionally, silver, a non-yielding asset, is likely to benefit from global rate cuts.

Key events this week include the US GDP report and the US Core PCE Index, both of which can impact currency and commodity markets. If US GDP exceeds 3.0%, dollar bulls could gain momentum. Likewise, if the US Core PCE Index comes in above 0.2%, the dollar may rally against other currencies like the Euro and commodities like silver.

EUR/USD Technical Analysis

After briefly breaking above the August 26 highs, EUR/USD reversed course, forming a bearish pin-bar on the daily chart. However, the pair remains above the 20-day Simple Moving Average (SMA), which suggests that a bearish reversal is unlikely for now. Both the 50-day and 100-day SMAs are trending upward, indicating strong buying momentum.

Key support lies at 1.1065—if this level holds, EUR/USD could attempt to test the July 2023 high of 1.1275.

EUR/USD Resistance Levels

• Resistance 1: 1.1153 (recent order block)
• Resistance 2: 1.1200 (psychological level)
• Resistance 3: 1.1275 (2023 high)

EUR/USD Support Levels

• Support 1: 1.1065 (recent swing low)
• Support 2: 1.1000 (psychological level)
• Support 3: 1.0945 (key horizontal level)

XAG/USD (Silver) Technical Analysis

Silver (XAG/USD) continues to follow gold due to its strong positive correlation. Although silver briefly topped $32.00, a slight pullback occurred. The uptrend remains solid, as the price stays above key moving averages.

The 20-day, 50-day, and 100-day SMAs are showing signs of congestion, hinting at potential consolidation around current price levels. A deeper pullback towards $30.00 is possible, but the long-term trend remains bullish due to the strong support from the order block zone.

XAG/USD Resistance Levels

• Resistance 1: $32.73 (potential new top)
• Resistance 2: $32.26 (recent swing high)

XAG/USD Support Levels

• Support 1: $31.28 (order block)
• Support 2: $31.31 (swing low)

Trading Outlook

Traders should keep an eye on upcoming key events, including US GDP data, the Fed Chair’s speech, and US inflation reports. These events could create trading opportunities in both EUR/USD and XAG/USD pairs. If the data exceeds expectations, the US dollar could regain strength, triggering pullbacks in EUR/USD and XAG/USD.

Conclusion

The ongoing weakness of the US dollar, driven by the Fed’s rate cut plans, continues to support EUR/USD and silver. However, upcoming US economic data and the Fed’s outlook could determine whether the dollar stages a meaningful recovery. As a result, traders should stay alert for shifts in market momentum, especially around significant economic releases.