EUR/USD Commences Week Cautiously; Quick Outlook

The EUR/USD pair begins the week with reserved momentum, hovering just slightly above the 1.0500s during the early Asian trading hours.

A renewed sense of global optimism is evident, fueled by China’s PMIs marginally surpassing expectations and the US government’s interim funding bill ratified over the weekend.Despite this, the prevailing market sentiment restricts significant gains for the traditionally defensive US Dollar (USD), indirectly providing a buffer for the EUR/USD dynamics. However, the increasing consensus surrounding the European Central Bank’s (ECB) possible inclination towards a rate cut poses challenges for the Euro.

Eurozone’s incipient transition from elevated inflation levels, combined with conjectures about a potential GDP downturn in the latter half of the year, have heightened expectations that imminent ECB rate augmentations might currently be unlikely.

Such assumptions gained traction following the recent release of Eurozone’s consumer inflation metrics, which indicated the core measure (excluding fluctuating categories like food) descending to 4.5% in September from a prior 5.3%.

Conversely, US Personal Consumption Expenditures (PCE) data perpetuates the prevailing perception of the Federal Reserve’s (Fed) sustained monetary policy tightening. This sentiment lends credence to the USD and curtails bullish optimism around the EUR/USD .

Specifically, the US PCE Price Index aligned with projections, escalating to 3.5% year-over-year through August, a slight increase from the preceding month’s adjusted 3.4%.Nevertheless, the primary Core PCE Price Index – the Fed’s favored inflation indicator – registered a moderation, dropping from July’s amended 4.3% to 3.9% in the reported period. Parallelly, factors such as amplified consumer expenditure and surging fuel prices hint at forthcoming price inflations.

This reinforces the US central bank’s firm stance on maintaining relatively elevated rates, bolstering the USD and its proponents.Considering these dynamics, it seems judicious for investors to seek substantial bullish momentum before leveraging the EUR/USD’s recent recovery from its near-1.0500 lows seen last week.

Market participants might opt for a cautious approach, especially in light of forthcoming US economic data releases marking the onset of the month. The impending release of the US ISM Manufacturing PMI, complemented by remarks from Fed Chair Jerome Powell, is poised to influence USD valuations in the subsequent North American trading session, offering potential catalysts for the currency pair.

EUR/USD Technical Outlook

The EUR/USD pair experienced a slight bearish tilt after encountering strong resistance at the 1.0600 mark. While there’s evident momentum suggesting a potential upward trajectory aiming for the 1.0675 zone, a breach above 1.0600 would strengthen this outlook. Conversely, if the pair falls below 1.0550, it could revert to a primary downward trend. Today’s anticipated trading range spans from a support of 1.0520 to a resistance of 1.0660, with the overall trend expected to be bullish.