EUR/USD Steadies at 1.1834 as Euro CPI Slows, Traders Eye Fed’s 4.25% Cut
The euro dipped after Eurostat confirmed the euro area’s final CPI slowed to 2.0% year-over-year in August, down from 2.1% in July...
Quick overview
- The euro declined after Eurostat reported a slowdown in the euro area's CPI to 2.0% in August, down from 2.1% in July.
- ECB President Christine Lagarde expressed caution regarding energy prices and growth uncertainty, impacting euro trading.
- The U.S. market anticipates a 25-basis-point cut in the Fed Funds Rate, with key economic indicators like building permits and housing starts being closely monitored.
- EUR/USD is consolidating at 1.1834, with a bullish structure intact as long as it remains above the support band of 1.1769-1.1746.
The euro dipped after Eurostat confirmed the euro area’s final CPI slowed to 2.0% year-over-year in August, down from 2.1% in July. Core inflation remained at 2.3% highlighting that underlying pressures are still there even as headline inflation cooled.
Earlier today ECB President Christine Lagarde was cautious, citing risks from energy prices and growth uncertainty. German bond markets were also in focus with the 30-year auction clearing at 3.25%, a small dip from 3.28%. This kept the euro from breaking above recent highs as traders weighed whether inflation is cooling fast enough for the ECB to stay on hold.
U.S. Events in Focus
The dollar side is heavy today. The U.S. calendar has building permits, housing starts and crude oil inventories but the real focus is on the Fed later today.
Markets expect a 25-basis-point cut and the Fed Funds Rate to 4.25% from 4.50%. Traders will parse the FOMC’s projections, dot plot and Chair Powell’s press conference to see if multiple cuts are still on the table this year.
- U.S. Building Permits forecast: 1.37M vs 1.35M
- Housing Starts forecast: 1.37M vs 1.43M
- Fed Funds Rate expected: 4.25% vs 4.50%
EUR/USD Technical Picture and Trade Setup
EUR/USD is consolidating at 1.1834 after its move to 1.1878 the top of the channel. It has pulled back to the 23.6% Fibonacci retracement at 1.1827 the first level of support. Momentum is showing fatigue with the RSI at 66 near overbought. The spinning top candles at 1.1878 reinforces the risk of a pause.
Still the bullish structure is intact. As long as EUR/USD holds above 1.1769-1.1746 support band buyers are in control. A confirmed break above 1.1878 could open up to 1.1901 and 1.1947.
EUR/USD Trade Setup:
For conservative traders a long entry could be taken if EUR/USD retests 1.1795-1.1769 and confirms with a bullish candlestick pattern like an engulfing or three white soldiers.
Stop below 1.1740, target 1.1900 and 1.1947. Below 1.1740 the bullish view is negated and momentum lower.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save