The EUR/USD pair has dipped below the 1.0850 level, signaling a potential further downside as momentum wanes ahead of key economic data releases. The focus is on the upcoming update to the pan-EU Gross Domestic Product (GDP) figures, as well as the Federal Reserve’s (Fed) rate decision and US Nonfarm Payrolls (NFP) report later in the week.
European markets are eagerly awaiting the release of German and pan-EU GDP figures set for Tuesday. Expectations point towards a slight easing in German GDP growth in Q2 and a modest increase in annualized pan-EU GDP growth. Inflation data in the form of the Harmonized Index of Consumer Prices (HICP) will be released on Wednesday, providing further insight into the economic health of the Eurozone.
Investors are closely watching the upcoming Fed rate call on Wednesday, anticipating signs of a potential rate cut in September. Market expectations suggest a 0.25% rate cut next month, with a slim possibility of a larger reduction. The release of US NFP data on Friday will also be crucial in determining the Fed’s next move, with a slowdown in hiring potentially prompting a new cycle of rate cuts.
On the technical front, the EUR/USD pair has retreated from recent multi-month highs and is now testing the 200-day Exponential Moving Average (EMA) at the 1.0795 level. Bids are sliding into long-term averages, and buyers are struggling to establish a strong foothold as the pair battles with the 50-day EMA at 1.0818.
The Euro is the currency for the 20 countries in the Eurozone and is the second most heavily traded currency in the world. The European Central Bank (ECB) in Frankfurt manages the monetary policy for the Eurozone, with a mandate to maintain price stability. Key economic indicators such as inflation, GDP, and trade balance data can significantly impact the value of the Euro and influence the ECB’s monetary policy decisions.
Overall, the EUR/USD pair is facing downward pressure as market sentiment turns cautious ahead of key economic data releases and central bank decisions. Traders are advised to closely monitor the upcoming data releases and central bank announcements to gauge the future direction of the currency pair.
