The EUR/USD pair has risen slightly above 1.1200 as the Euro gains strength despite worries over Eurozone economic growth. The European Central Bank (ECB) is expected to cut interest rates in one of the remaining two policy meetings this year, which could impact the Euro further. The next trigger for the US Dollar will be the US core PCE inflation data for August, which will be closely watched by investors.
In Wednesday’s trading session, the EUR/USD pair tested above the key resistance level of 1.1200, gaining as the US Dollar remains under pressure. The Dollar has been impacted by an improvement in risk appetite among investors following China’s announcement of massive stimulus plans to revive its economy. This has led to reduced investment flows into the US Dollar during periods of positive market sentiment. Additionally, increasing bets on a large rate cut by the Federal Reserve in November have also weighed on the Greenback.
The CME FedWatch tool indicates a higher likelihood of the Fed reducing interest rates by 50 basis points in the near term, adding to the pressure on the US Dollar. This week, focus will be on the US core PCE inflation data for August, which is expected to show an increase to 2.7%. This data, along with the release of US Durable Goods Orders for August, will provide further insight into the health of the US economy and the potential actions of the Federal Reserve.
Despite concerns over Eurozone economic growth, the Euro has outperformed its major peers, including the US Dollar. This strength comes despite a decline in business activity across the Eurozone, with manufacturing sectors contracting in major economies like Germany and France. Market expectations for ECB interest rate cuts for the rest of the year will guide the future performance of the Euro against other currencies.
In terms of technical analysis, the EUR/USD pair has risen above 1.1200 and aims to maintain this level. Strong buying interest near the 20-day Exponential Moving Average has supported the pair’s recovery. To sustain its upward momentum, the pair will need to hold above the Rising Channel chart pattern support near 1.1000. A break above 1.1200 could lead to further appreciation towards higher resistance levels. However, a decline below 1.1000 could signal a reversal in the pair’s current trend.
The US Core Personal Consumption Expenditures Price Index (PCE) is an important economic indicator that measures changes in consumer prices in the US. This index is the Fed’s preferred gauge of inflation and excludes volatile components like food and energy. The YoY reading compares prices from the current month to the same month in the previous year. A high reading of the core PCE is seen as bullish for the US Dollar, indicating potential strength in the currency, while a low reading is viewed as bearish. Investors will closely watch this data release for insights into inflation trends and potential Fed actions.
