The EUR/USD pair struggles to extend its upside above 1.1200 as the European Central Bank (ECB) is expected to cut interest rates again in September. Fed’s Chairman Jerome Powell signals an interest-rate cut in September, while investors anticipate the US core PCE inflation data for July and flash Eurozone HICP for August. Market expectations for ECB interest rate cuts have increased due to rising uncertainty over the Eurozone economic outlook and easing wage growth.
Despite a rebound in economic activity in the Eurozone in August, driven by strong demand in France due to the Olympics in Paris, ECB Chief Economist Philip Lane emphasized the need for restrictive monetary policy. Lane acknowledged progress in inflation but cautioned that success is not assured. Investors are waiting for the preliminary German and Eurozone Harmonized Index of Consumer Prices (HICP) data for August for further guidance on interest rates. The IFO Institute reported that German Business Climate in August beat expectations but remained lower than July’s readings, failing to provide momentum for the EUR/USD pair.
In terms of the Euro’s performance against major currencies, the Euro was the strongest against the New Zealand Dollar. The heat map displays percentage changes of major currencies against each other, indicating the Euro’s performance on a daily basis. The broader outlook for the EUR/USD pair remains positive as the USD remains on the backfoot with Fed rate cut expectations fully priced in.
Technical analysis suggests a bullish reversal for EUR/USD as it stumbles near 1.1200, with a breakout of the Symmetrical Triangle pattern and a strong upside momentum indicated by the 14-period RSI. The US economic front shows strong Durable Goods Orders data for July, indicating a potential trigger for the US Dollar. The upcoming US core PCE Price Index data for July will be closely watched for inflation measures.
The Durable Goods Orders are an important economic indicator released monthly by the US Census Bureau measuring orders received by manufacturers for durable goods. A high reading is generally bullish for the USD. The latest release showed a 9.9% increase, exceeding the consensus of 4%, indicating positive production activity in the US. Overall, the EUR/USD pair faces challenges due to expected interest rate cuts by the ECB while the broader outlook remains positive with USD weakness and strong economic indicators in the US.
