EUR/USD stays range-bound post US presidential debate, could PPI provide fresh impetus?

The EUR/USD pair continues to struggle to gain traction, currently trading just above the 1.1000 psychological level after hitting a four-week low. Attention now shifts to the impact of Thursday's European Central Bank (ECB) decision, which delivered a quarter-point interest rate cut, marking its second reduction to the deposit rate this year. This move reflects the ECB's response to cooling inflation in the Eurozone and could influence trader sentiment in the days ahead.

Germany’s Consumer Price Index (CPI) has dropped to its lowest level in over three years, adding pressure to the euro, while modest strength in the U.S. dollar provides additional headwinds for the EUR/USD pair.

Tuesday’s U.S. presidential debate heightened market sensitivity as VP Kamala Harris and former President Donald Trump presented opposing economic policies. With a tight race according to pollsters, election dynamics could spur increased market volatility, offering traders opportunities to capitalize on potential swings.

Trump advocates for substantial corporate tax cuts, aiming to lower the rate to 15%, which could boost corporate profits and bolster stock market performance. His pro-business stance, combined with support for the oil industry, seeks to strengthen U.S. production. Depending on how energy markets respond, this may impact the dollar in mixed ways.

Trump’s backing of Bitcoin also signals optimism for the cryptocurrency market, though its direct influence on the dollar would be limited. His broader economic strategy, focused on lower taxes, could lead to short-term dollar strength as businesses and investors react positively.

VP Harris on the other hand, supports raising taxes, particularly on capital gains, which could weigh on stock markets and subsequently affect the dollar. Her policies on green energy and healthcare reforms could introduce volatility in sectors like healthcare and renewables. If her campaign gains momentum, it may encourage caution in financial markets, potentially pushing investors toward safer assets like U.S. Treasuries, strengthening the dollar as a safe haven.

Bitcoin and Gold may also experience increased volatility. Trump’s pro-crypto stance could fuel optimism in Bitcoin, while Harris’s tax and healthcare policies could prompt demand for safe-haven assets like Gold. If the dollar strengthens due to investor risk-aversion, Gold—which typically moves inversely to the dollar—may come under pressure.

EUR/USD technical outlook: Will PPI lead to a bounce?

In the longer term, the EUR/USD pair remains bullish, trading above the 100-day moving average on the daily chart. However, in the short term, the pair remains range-bound as traders closely monitor the impact of the U.S. Producer Price Index (PPI) data.

The latest PPI figures showed a slower pace, rising 1.7% compared to expectations of 1.8% and down from 2.1% in July, which had been revised downward from 2.2%. This softer-than-expected inflation data could put downward pressure on the dollar, potentially boosting the euro and providing the pair with upward momentum.

On the technical side, buyers will likely encounter resistance at 1.10304, with further upside potentially capped at the 1.10500 psychological level. On the downside, the 1.10000 psychological level remains a key support area, where the pair could stabilize if selling pressure intensifies.

As traders digest the ECB’s rate cut and U.S. inflation data, the EUR/USD pair may find itself poised for movement, with volatility expected in the lead-up to the U.S. elections and additional economic releases.

Source: Deriv MT5