**EUR/USD Forecast: Euro Holds Firm Above Key Support Ahead of Crucial US Economic Data**
*By Pablo Piovano (Original article published on FXStreet)*
*Rewritten and expanded by AI Assistant*
The EUR/USD currency pair continues to trade within a narrow band, maintaining a sturdy position above a key support level. As the week unfolds, investors are carefully monitoring economic data from the United States which could trigger higher volatility and potentially induce directional bias in the world’s most-traded currency pair.
This article provides an in-depth overview of EUR/USD price actions, key technical levels, macroeconomic factors at play, and upcoming data releases that may shape the currency’s short-term trajectory. It incorporates the original insights provided by Pablo Piovano in FXStreet’s latest analysis and expands them to offer further background and market context.
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## Summary of Recent Price Action
The EUR/USD pair is trading marginally positive after managing to remain above the 1.0800 psychological mark. During early European trading hours, the common currency demonstrated resilience, climbing slightly towards the 1.0845 area. Risk sentiment in global markets remains cautious ahead of pivotal data releases from the US, which suggests that market participants are treading carefully, avoiding strong commitment in either direction.
– Recent lows around 1.0800 have been tested multiple times, confirming the level as a significant short-term support.
– The recent consolidation comes after a corrective move from August’s highs above 1.0950.
– The Dollar Index (DXY) has also been trading within a limited range, reflecting uncertainty about the Federal Reserve’s next policy moves.
This nuanced back and forth reflects broader macroeconomic uncertainties and varied expectations regarding monetary policy between the European Central Bank (ECB) and the Federal Reserve.
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## Market Drivers and Themes Influencing EUR/USD
### 1. US Economic Data on the Horizon
Investor attention is firmly directed at upcoming macroeconomic indicators from the United States, as these are likely to shape expectations for future interest rate decisions by the Federal Reserve.
Key US data to watch includes:
– **Core Personal Consumption Expenditures (PCE)**, the Fed’s preferred inflation gauge.
– **Initial Jobless Claims**, an indicator of labor market strength.
– **GDP Growth for Q2 2024**, reflecting the overall health of the US economy.
– **Consumer Confidence Index**, helpful for assessing household sentiment and potential consumer spending behavior.
– **Nonfarm Payrolls (NFP)**, although not due this week, are always a forward-looking market mover and will influence the Fed outlook.
These data points will offer critical clues on whether the US central bank might pause its cycle of tightening, maintain the current rate, or signal the possibility of rate increases later this year.
### 2. Federal Reserve Policy Outlook
Presently, market expectations indicate that the Federal Reserve may adopt a data-dependent approach for the remainder of 2024. At recent public appearances, Fed officials have reiterated their commitment to bringing core inflation closer to the 2 percent target. While inflation numbers are moderating, some components remain sticky, giving policymakers room for a cautious stance.
Highlights:
– Interest rate futures suggest the market is pricing in a possible pause at the next FOMC meeting.
– Future cuts are unlikely unless inflation drops below critical thresholds or if labor market conditions deteriorate severely.
– The Fed’s decisions will be significantly influenced by the incoming PCE report and labor market metrics.
The divergence in interest rate expectations between the Fed and the ECB may continue to cap upside momentum in EUR/USD, particularly if eurozone growth remains weak.
### 3. ECB’s Monetary Policy Stance
On the European side, the European Central Bank remains in a delicate position. Inflation in the eurozone has been trending downward, yet remains elevated by historical standards, particularly in services. The ECB hiked rates aggressively throughout 2023 and early 2024, but may now be leaning towards a plateau.
Points of note:
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