Title: EUR/USD Price Forecast: Buyers Wait for Fresh Clues Ahead of Key US and Eurozone Data
By: FXStreet Research Team
The EUR/USD currency pair showed muted movement in the early part of the European trading session as market participants awaited a series of critical macroeconomic reports from the US and the Eurozone. After climbing from recent lows, the pair was observing a consolidation phase around the 1.0950 psychological level. The cautious sentiment in markets indicated a general wait-and-see approach among traders seeking directional clarity from forthcoming economic indicators.
Current Technical Landscape
EUR/USD recovered significantly from its monthly lows last week, gaining support from a combination of a weaker US Dollar and improving European data. Despite this upturn, the bullish momentum appeared to stall near significant technical levels, suggesting that the recovery might remain limited unless buyers are offered fresh catalysts.
Key technical details:
– The pair trades slightly above the 1.0900 level, with the 1.0950 zone acting as a near-term resistance.
– The 50-day Simple Moving Average (SMA) lies close to this range, serving both as a support and a short-term bearish-bias indicator.
– A break above 1.0950 could open doors toward the 1.1000 psychological barrier, followed by further upside to 1.1040 and 1.1090.
– On the downside, initial support lies around 1.0900, followed by the 1.0870 zone, and then the stronger demand near 1.0820.
The tight technical range reflects broader uncertainty in the forex market, dominated by monetary policy expectations, US economic releases, and geopolitical factors.
Catalysts for the Next Move
Investor attention is focused squarely on upcoming economic events. These include both hard data and central bank messaging that could provide direction for the EUR/USD pair. Both the Federal Reserve and the European Central Bank (ECB) have expressed data-dependence in their policy-making, and as such, each data release gains significant weight in the short term.
Key data and events to watch this week:
– US Consumer Price Index (CPI) data: A hotter-than-expected reading could push expectations toward prolonged Fed tightening, benefiting the US Dollar.
– Eurozone GDP figures: A rebound in GDP could support the Euro and reinforce ECB’s hawkish guidance.
– Fed Chair Jerome Powell’s speech: Traders will monitor Powell’s tone for additional cues on the path of interest rates.
– ECB speakers and inflation remarks: Any language suggesting further rate hikes could shift expectations and support the Euro.
In the absence of immediate high-impact data at the start of the week, EUR/USD is likely to remain in a consolidative phase.
US Dollar Weakens Amid Changing Fed Outlook
The US Dollar, which rallied in Q2 2024 on the back of persistent inflation and hawkish Fed rhetoric, has recently begun to show signs of fatigue as markets digest that most of the projected rate increases are already priced in. The yield on the US 10-year Treasury Note has also pulled back from recent highs, taking the greenback down along with it.
Factors contributing to Dollar softness:
– Diminishing rate hike expectations: The Fed has signaled a more balanced approach, prompting a re-rating of terminal rate forecasts.
– Downward revisions in inflation forecasts: Markets are now anticipating a gradual decrease in inflation, which could reduce the urgency for rate hikes.
– External geopolitical factors: Risk sentiment remains fragile, but it has generally moved toward improved stability, reducing demand for the safe-haven Dollar.
As a result, investor sentiment has tilted slightly in favor of riskier assets, including European currencies.
Euro Finds Modest Support from ECB Expectations
On the Euro side, the single currency has benefited from expectations that the ECB will persist in its tightening cycle longer than the Fed. Recent commentary from ECB policymakers suggests that sticky core inflation and resilient labor markets in the Eurozone warrant further tightening.
ECB-related factors supporting the Euro:
Read more on EUR/USD trading.