EUR/USD Outlook: German Inflation Data Spurs Brief Rally

  • Inflation in Germany eased more than expected.
  • Estimates show that Eurozone price pressures might fall from 2.2% to 1.9%. 
  • The US core PCE price index increased by 0.1% which is below estimates.

The EUR/USD outlook shows a sudden, brief rally after German inflation data triggered a decline in ECB rate cut bets. Meanwhile, the dollar remained vulnerable after last week’s soft inflation figures. Market participants are now awaiting the nonfarm payrolls report.

Are you interested in learning more about Canada forex brokers? Check our detailed guide-

Data on Monday revealed that inflation in Germany eased more than expected. Consequently, traders expect soft Eurozone inflation in September. However, the euro rallied since the figures were better than those from France and Spain. 

The European Central Bank paused after starting its monetary easing in June. However, inflation has continued falling, with economists expecting further declines in September. Estimates show that Eurozone price pressures might fall from 2.2% to 1.9%. Such an outcome would push the ECB to lower borrowing costs further. Analysts expect the central bank to cut rates in October and December.

On the other hand, the Fed is quickly catching up to other central banks after starting with a 50-bps rate cut. Moreover, inflation in the US has consistently dropped, giving policymakers confidence to lower borrowing costs. On Friday, the core PCE price index increased by 0.1%, below estimates of 0.2%. The report raised the likelihood of a 50-bps rate cut at the November meeting, weighing on the dollar. 

The next major report is the nonfarm payrolls, which will further shape the outlook for rate cuts. Economists predict a slight increase in job growth in September. Meanwhile, the unemployment rate could hold steady at 4.2%. 

EUR/USD key events today

EUR/USD technical outlook: Price action points to corrective move

EUR/USD technical outlookEUR/USD technical outlook
EUR/USD 4-hour chart

On the technical side, the EUR/USD price has paused again at the 1.1200 resistance level. At the same time, the price trades above the 30-SMA with the RSI above 50, supporting a bullish bias. Additionally, EUR/USD trades in a bullish channel, making higher highs and lows. 

Are you interested in learning more about social trading platforms? Check our detailed guide-

However, price action shows that both bears and bulls are strong. Therefore, the uptrend might be a corrective move. In that case, the price might soon make a sharp, impulsive move up or down. A break above 1.1200 would allow the price to continue trending upward. On the other hand, the RSI has made a bearish divergence. If it plays out, the price might collapse to break out of its channel.

Looking to trade forex now? Invest at eToro!

68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *