Euro Gains Amid Firm Speculation Of Fed Rate Cut.

Fundamental Analysis

* Fed Buzz: The Euro has gained ground against the US dollar, propelled by strong speculation that the Federal Reserve will initiate interest rate cuts starting from the September meeting, thereby exerting downward pressure on the dollar. The recent muted Consumer Price Index (CPI) release sparked fresh optimism that the disinflationary pattern, which commenced in late 2023 but had paused earlier this year, had resumed. This prompted traders to anticipate that the Federal Reserve might begin easing policy constraints in the autumn, consequently exerting downward pressure on the greenback. Sellers capitalized on this scenario, increasing bearish bets on the dollar.

Technical Analysis

* Technical Breakout: EURUSD was traded higher following prior breakout above the previous resistance level 1.0860. MACD which illustrate diminishing bearish momentum signal suggest the pair to further extend its gains.

* Resistance and Support: If the bullish momentum persists, there’s a strong likelihood that the price will potentially head towards 1.09200. Conversely, a potential trend retracement and reversal is also to be expected and the price could head back towards 1.0805 should the price breaks below the level 1.0860.

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Potential Risks

Moving ahead, the market will continue to assess the trajectory based on economic data from the U.S. The current week’s economic calendar for the U.S. appears relatively light, which may allow recent foreign exchange movements to stabilize. However, a reevaluation of the near-term outlook will be necessary later this month, aligning with the release of the next set of core Personal Consumption Expenditures (PCE) figures. As the Federal Reserve’s preferred measure of inflation, the PCE deflator will offer crucial insights into the current inflationary landscape, playing a pivotal role in shaping the central bank’s policy direction and influencing broader market trends.

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Monitoring

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.