EURUSD
Fundamental Perspective
The EURUSD pair closed the week on a downtrend, extending its two-week decline to around 1.12%. The euro faces pressure as investors anticipate significant announcements from the Federal Reserve (Fed) and the European Central Bank (ECB). The Fed's upcoming meeting on Wednesday is widely expected to keep interest rates steady. Still, market participants are keenly watching for any shifts in policy language that could signal future changes. Such guidance could have a profound impact on market sentiment and trading strategies.
In the Eurozone, attention is riveted on the release of the Harmonized Index of Consumer Prices (HICP) data scheduled for Wednesday. This report will provide crucial insights into potential ECB policy adjustments. July's year-over-year headline inflation is forecasted to ease to 2.3% from 2.5%, which might influence expectations regarding further ECB rate cuts. Meanwhile, the U.S. will also focus on the Nonfarm Payrolls (NFP) report, which will be released on Friday. This report will offer vital information about the health of the U.S. labor market and its potential impact on Fed policy decisions.
Despite rising inflationary pressures, market sentiment has shifted towards increased risk appetite, with many expecting a Fed rate cut in September. The CME's FedWatch Tool indicates a 100% probability of a rate cut, with some market players even anticipating a 50-basis-point reduction. However, this optimism will be tested by the forthcoming economic data, which will play a crucial role in determining the EUR/USD pair's trajectory. As traders navigate these uncertain waters, economic indicators and central bank actions will heavily influence their decisions, setting the stage for potential volatility.
Technical Perspective
The last weekly candle closed red after a doji candle with a long upper wick, reflecting fresh sell pressure, although buyers still have hope as the overall trend is bullish.
In the daily chart, the price is facing some resistance near 1.0946, breaking the previous peak of 1.0910. The RSI indicator reading remains neutral as the signal line floats above the midline of the indicator window, enabling room for the price to regain the recent peak of 1.0946. In this outlook, the next resistance level is at the 1.1080 level.
On the bearish side, the ongoing selling pressure can take the price toward the nearest support of 1.0746, followed by the next support near 1.0676.
