- EUR/USD has continued to edge higher following Monday's positive close.
- Disappointing sentiment data from Germany and the euro area had little to no impact on the euro.
- Annual CPI inflation in the US is forecast to edge lower to 8.1% in August from 8.5% in July.
After having registered modest losses on Monday, EUR/USD has managed to stretch higher early Tuesday and climbed above 1.0150. Unless safe-haven flows start to dominate the financial markets, the pair remains on track to extend its rebound.
The risk-positive market atmosphere and hawkish comments from European Central Bank fueled EUR/USD's rally on Monday. Although the pair erased a portion of its daily gains during the American trading hours, it ended up closing the day above the key 1.0100 handle.
The data from the euro area showed early Tuesday that the Economic Sentiment Index of the ZEW survey slumped to -60.7 in September from -54.9 in August. For Germany, the Economic Sentiment Index slumped to -61.9 from -55.3. "Together with the more negative assessment of the current situation, the outlook for the next six months has deteriorated further," ZEW said in its publication.
Despite the gloomy sentiment data, the shared currency stays relatively resilient against the dollar as investors wait for the US Bureau of Labor Statistics to publish the August Consumer Price Index (CPI) data.
On a yearly basis, the CPI is forecast to decline to 8.1% from 8.5% in July. The Core CPI, however, is expected to edge higher to 6.1% from 5.9%. Considering that markets are nearly fully pricing in a 75 basis points Fed rate hike in September, the positive impact of a hot inflation report on the dollar's valuation could remain short-lived. On the other hand, a smaller than expected increase in Core CPI should put additional weight on the greenback's shoulders and help EUR/USD preserve its bullish momentum.
EUR/USD Technical Analysis
EUR/USD is trading within a touching distance of 1.0160 (Fibonacci 61.8% retracement of the latest downtrend). In case the pair clears that hurdle and flips into support, it could test 1.0200 (psychological level, Monday high) and target 1.0245 (static level) afterwards.
On the downside, 1.0100 (200-period SMA, Fibonacci 50% retracement) aligns as key support. A daily close below that level could be seen as a significant bearish development and bring in additional sellers, dragging the pair back toward 1.0050 (Fibonacci 38.2% retracement) and 1.0000 (psychological level, 50-period SMA, 100-period SMA).
In the meantime, the Relative Strength Index (RSI) indicator on the four-hour chart holds comfortably above 60, confirming the near-term bullish bias.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.