EUR/USD Cautious at Key Support Ahead of US CPI & ECB Decision
EUR/USD Analysis
The European Central Bank was the first of the Big-3 to pivot in June and is now poised to deliver its second rate cut on Thursday, supported by the recent releases. Preliminary data showed that inflation eased to 2.2% y/y and the slowest pace in three years, wages moderated from their eleven-year peak and the bloc's economic engine – Germany – experienced a GDP contraction in Q2.
The path ahead is less clear, so the updated projections will be crucial, since slower growth would call for bolder action, but hawks could resist such pressure. Markets will also focus on President's Lagarde press conference for more insights around future intentions, but she is unlikely to abandon the data-dependent rhetoric and offer clearer signs.
A day earlier, US CPI update will be in in the spotlight. As price pressures have abated, the Fed is now looking more to the employment part of its mandate. The last NFPs cemented the pivot, but did not settle the debate over the size. Markets price in a 0.25% move, but a soft inflation print could raise bets for bigger move, whereas upside surprise could puncture optimism for aggressive easing.
These two events can spur volatility and will determine the trajectory of EUR/USD, which has advanced in Q3 despite the ECB's early lead, as markets expect multiple cuts by the Fed.
On the technical front, after its recent pullback EUR/USD tries to defend the crucial support cluster, provided by the 38.2% Fibonacci of the August rise and the EMA200. Successful effort would reaffirm the bullish bias and provide the opportunity for new 2024 highs (1.1201), but we are cautious around sustained gains past that given the monetary policy differential. Moves below the EMA200 would expose the pair to the 76.4% Fibonacci and the ascending daily Ichimoku Cloud.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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