EUR/USD Pushes Higher as Markets Rethink Fed Outlook

Traders' Opinions

Summary:

EUR/USD edges higher as weaker US employment data reduces expectations for a September Fed rate hike. Improving Eurozone investor confidence is providing additional support, while Wednesday’s US CPI report represents the next major catalyst.

BUY EURUSD

EXP

TRADING

1.15502

Entry Price

1.16600

1.15000

1.15497 -0.00069 -0.06%

0.0

Pips

Flat

1.15000

Exit Price

1.15502

Entry Price

1.16600

The Euro is extending its advance against a softer US Dollar on Monday, with EUR/USD trading around 1.1560 as investors reassess the Federal Reserve’s interest-rate outlook following disappointing US employment figures.

Pressure on the Greenback has increased after weaker-than-expected Nonfarm Payrolls data reduced expectations that the Fed will raise interest rates in September. That shift has provided EUR/USD with underlying support, although uncertainty surrounding higher oil prices and the Strait of Hormuz remains a potential headwind for the Eurozone economy.

European data, meanwhile, offered the Euro an additional boost. The Sentix Eurozone Investor Confidence Index climbed to 0.9 in August, returning to positive territory for the first time since February and improving sharply from -3.1 in July and -13.4 in June.

The improvement was particularly strong in the current conditions component, which increased by 6.8 points. Expectations also improved, while sentiment toward Germany rose to 6.0, its strongest reading since February.

The Sentix figures strengthen the argument that confidence in the Eurozone recovery is gradually returning. However, EUR/USD's immediate direction remains more dependent on the Dollar and shifting Fed expectations than European data alone.

Attention now turns to Wednesday’s US Consumer Price Index report. Headline inflation is expected to ease to 3.4% year-on-year from 3.5%, while Core CPI is forecast to slow to 2.5% from 2.6%.

A softer inflation report would further undermine expectations for a September Fed hike and could extend EUR/USD's recovery. Conversely, unexpectedly persistent inflation could quickly revive tightening expectations and provide the Dollar with an opportunity to recover.

Technical Analysis

EUR/USD has developed a stronger bullish structure on the 4-hour chart following its sharp recovery from the 1.1370–1.1390 region. The pair is currently trading around 1.1550 and attempting to establish itself above the important 1.1540–1.1555 zone, which previously acted as resistance and is now being tested as support.

The recent sequence of higher highs and higher lows keeps buyers in control. A sustained hold above 1.1540 would favor another challenge of the recent highs around 1.1580–1.1590. A decisive breakout above this area could accelerate the advance toward 1.1630, followed by the major 1.1655–1.1670 resistance zone.

On the downside, a break back below 1.1540 would expose the 1.1510 area. More significant support is located around 1.1470–1.1480, and a sustained move beneath this region would weaken the bullish structure considerably, potentially reopening the door toward 1.1390.

Overall, EUR/USD remains technically bullish while holding above 1.1540. In my view, the current consolidation resembles a retest of former resistance, with a successful defense favoring continuation toward 1.1600 and ultimately 1.1660.

TRADE RECOMMENDATION

BUY EUR/USD

ENTRY PRICE: 1.1550

STOP LOSS: 1.1500

TAKE PROFIT: 1.1660

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EUR/USD Pushes Higher as Markets Rethink Fed Outlook

Technical Analysis

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