The EUR/USD pair has seen a rise from 1.1100 after investors reacted to downbeat flash Eurozone PMI data for September. Market participants are expecting the Fed to further cut interest rates by 50 basis points in November. Investors are now shifting their focus to the US PCE inflation data for August.
The Euro gained after finding buying interest near the key support level of 1.1100 in Tuesday’s North American session. This recovery comes after Monday’s losses, which were triggered by the release of the flash Eurozone PMI data. The PMI report showed that business activity unexpectedly contracted, leading to concerns about the European Central Bank opting for a second interest rate cut in the upcoming October meeting.
The decline in the PMI was mainly driven by the manufacturing sector, where contraction accelerated at a faster pace than expected. The service sector also showed slower growth than predicted by economists. This weakening outlook for Eurozone activity adds to the challenges faced by ECB policymakers in maintaining stable market conditions.
The US Dollar struggled to hold ground above 100.50 against a basket of major currencies on Tuesday, as traders anticipate more rate cuts from the Fed in November. While some expect a 50 basis point cut, others, like Fed Governor Michelle Bowman, suggest that larger cuts may not be necessary as inflation risks remain a concern. Economic data from the US also showed mixed results, with the composite PMI slightly lower and manufacturing sector activity declining further.
Looking ahead, investors will be closely watching the US PCE inflation data for August, which could influence market expectations for a Fed rate cut. On the technical front, the EUR/USD pair bounced back from the 20-day EMA and found support near the psychological level of 1.1000. Resistance levels for the pair are seen at 1.1200 and 1.1276, while support levels are at 1.1000 and 1.0950.
In conclusion, the EUR/USD pair has seen a rebound after the release of weak Eurozone PMI data, with investors now focusing on the US PCE inflation data and expectations for further Fed rate cuts in November. The technical outlook for the pair remains firm as long as it maintains above the key psychological support level of 1.1000. Market participants will be closely monitoring upcoming economic data releases for further insights into the direction of the currency pair.
