**EUR/USD Analysis: Greenback Holds Firm Following ISM Print, Focus Turns to Fed’s Next Move**
*By Matt Simpson, Senior Market Analyst at Mitrade*
**Introduction**
The EUR/USD currency pair remains in focus as the US dollar has shown resilience following the latest ISM manufacturing data. The performance of the greenback continues to be shaped by market speculation about the timing and scale of the US Federal Reserve’s next policy move. This article delves into the latest developments influencing EUR/USD, dissects technical and fundamental analysis, and explores what may lie ahead during the coming sessions.
**Recent US Data and Dollar Dynamics**
Recent economic releases from the United States have remained central for forex traders, particularly because economic momentum in the world’s largest economy carries significant implications for global financial markets. In the latest session, the ISM Manufacturing PMI offered fresh insights:
– The ISM Manufacturing PMI came in at 48.5, beating consensus forecasts of 47.8.
– New orders showed signs of improvement.
– Prices paid dipped, relieving some inflation concerns.
Despite weakening activity in some manufacturing subsectors, the broader data indicates a US economy that remains more robust than many of its advanced peers. This comparatively strong performance has helped to underpin the dollar:
– US interest rates remained higher for longer than markets previously expected, supporting the greenback.
– The Federal Reserve’s communications have generally leaned hawkish, making traders cautious about pricing in rate cuts.
These factors collectively keep EUR/USD on the defensive, particularly as Europe’s own economic data continues to underwhelm.
**European Outlook: Sluggishness Persists**
On the other side of the pair, the euro has struggled to find consistent supports due to lackluster economic performance in the eurozone. While inflation is gradually cooling across the bloc, this progress comes at the cost of slowing growth:
– Euro area composite PMI remains just below 50, signaling contraction.
– Germany—the eurozone’s largest economy—continues to face headwinds, including weaker manufacturing and subdued demand from China.
– The European Central Bank has indicated that monetary policy is likely to stay restrictive until inflation fully normalizes, but markets believe rate hikes may have already peaked.
These developments make it difficult for the EUR to regain ground, as confidence in the region’s economic prospects remains fragile.
**Central Bank Focus: Markets Await Next Moves**
With major economic data now in hand, the immediate question turns to central banks and their guidance over the remainder of the year. For the Federal Reserve, the latest employment, inflation, and ISM figures will shape expectations for the September meeting and beyond:
– Futures markets now show roughly a 65 percent probability of a rate cut by November, versus 45 percent a few weeks ago.
– Fed officials have stressed a “data-dependent” approach, with some noting lingering upside risks to inflation.
– Even with softer inflation, the Fed may be slower than expected to deliver rate cuts unless economic growth falters.
For the European Central Bank:
– Inflation progress is more advanced than in the US, giving the ECB some rhetorical flexibility.
– However, growth worries and external risks, such as energy security and geopolitical uncertainties, will temper any dovish signals.
**Technical Analysis: EUR/USD at a Crossroads**
Examining the EUR/USD chart reveals a pair at a critical inflection point as the market processes the recent economic surprises.
– The pair is trading near the lower boundary of its recent range, around 1.0750–1.0800.
– Key support levels include 1.0730 (June swing low) and 1.0700 (psychological level, round number).
– Immediate resistance stands at the 1.0850 zone, followed by 1.0900.
– The 200-day moving average at 1.0820 may serve as a pivotal level, with a sustained move below signaling deeper downside risk.
Momentum indicators suggest a tentative bearish bias as long as the price remains under the 200
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