On Wednesday, the EUR/USD pair declined by 170 pips but stopped at the 1.1400 mark. This is a strong support level, identified across multiple timeframes: on H4, it coincides with the lower line of the Bollinger Bands indicator; on D1, it's the lower boundary of the Kumo cloud; and on W1, it matches the middle line of the Bollinger Bands. Sellers backed off from this zone, although bearish sentiment continues to prevail for the pair.

It can be said that the stars aligned for the dollar on Wednesday: key macroeconomic reports (U.S. GDP, ADP) came out in the green zone, and the outcome of the July Federal Reserve meeting turned out to be more hawkish than most analysts expected. As a result, the U.S. Dollar Index hit a two-month high, reaching 99.73. On Thursday, we saw a corrective pullback, driven by both technical and fundamental reasons.

Let's begin with the macroeconomic data, which indeed exceeded expectations. For example, most experts forecasted a 2.4% growth in the U.S. economy for the second quarter. A similar picture was shown by the Atlanta Fed's GDPNow indicator. But the result surpassed expectations: U.S. GDP grew by 3.0% following a 0.5% contraction in Q1.

The report's structure shows that imports declined by 30% after surging 40% in the previous quarter, when importers stockpiled goods ahead of April's tariff hikes. This technical factor increased GDP (as imports negatively affect the headline figure). Consumer spending, which accounts for two-thirds of the U.S. economy, also rose by 1.4% in Q2 compared to 0.5% growth in Q1.

On the downside, investment declined. In particular, residential investment fell by 4.6%. Business investment in fixed assets slowed to 0.4%. Additionally, exports dropped by 1.8% — the lowest since Q2 2023.

In other words, at first glance, the 3.0% GDP growth in Q2 looks impressive. But, as in Q1, the overall picture is distorted by unstable trade flows. This time, foreign trade indicators created a statistical boost, pushing the headline figure into the green. Meanwhile, the core economy is growing at a slow pace, signaling potential deceleration.

Nevertheless, the market reacted positively to the release — the dollar strengthened broadly. Additional support came from the ADP report, a kind of barometer ahead of the Nonfarm Payrolls release. According to ADP, the U.S. private sector added 104,000 jobs (versus a forecast of +77,000). This suggests a moderate rebound in the labor market, indicating renewed business and consumer confidence. And although ADP data doesn't always correlate with the NFP, Wednesday's release added to the pressure on EUR/USD.

The Fed also contributed to the overall fundamental picture with the results of its July meeting. On the one hand, the central bank followed the baseline scenario and kept the interest rate unchanged. On the other hand, Jerome Powell made it clear that a rate cut in September is highly uncertain — even though two FOMC members (Christopher Waller and Michelle Bowman) voted in favor of a cut, while the rest supported maintaining the status quo (a situation not seen since 1993).

During the press conference, Powell took a cautious stance, refraining from forecasting a rate cut in September, citing uncertainty in the inflation outlook. He stated that the Fed is "awaiting clearer signs of sustained disinflation toward 2%," and noted risks both from inflation and economic slowdown. Commenting on the July decision, Powell said current policy is "still moderately restrictive, but not holding the economy back."

Also worth noting are some revised phrases in the Fed's accompanying statement compared to the June communique. In June, the Fed said that macro indicators "continue to expand at a solid pace." But following the July meeting, it revised this view, stating that "recent data suggest that economic activity slowed in the first half of the year."

Despite the more cautious language in the statement, the July meeting outcome can be described as moderately hawkish. Market expectations support this view: according to the CME FedWatch tool, the probability of a "wait-and-see" approach at the September meeting has increased to nearly 60%. Before the July meeting, this probability was below 35%.

Additionally, the core PCE index came in above expectations — rising to 2.8% YoY, while most analysts had expected 2.7%. This marks the second consecutive month of acceleration.

Thus, the bearish impulse for EUR/USD appears well-justified. Yet sellers have failed to break through the 1.1400 support level, which corresponds to the lower Bollinger Band on H4, the lower Kumo boundary on D1, and the midline of the Bollinger Bands on W1.

On Thursday, the U.S. Dollar Index (and thus EUR/USD) is correcting ahead of August 1 — the expiration of the so-called "preferential tariff period." New tariffs could affect some of the U.S.'s major trade partners, including India, Canada, Mexico, and Taiwan. Unlike previous deadlines, the White House insists that this time Donald Trump will not extend the "tariff pause," as he has done twice before. This factor adds background pressure on the greenback.

Opening short positions on EUR/USD would be appropriate only if bears manage to push through the 1.1400 support level. If the southern impulse fades in this price area (for example, if the July NFP report does not favor the dollar), EUR/USD buyers may regain the initiative. In that case, long positions will again be preferable — at least in the context of corrective rebounds toward 1.1590–1.1610 (Tenkan-sen and Kijun-sen levels on the D1 timeframe, respectively).