The EUR/USD pair has rebounded to near 1.0850 in Thursday’s European session, even as concerns over the Eurozone’s economic prospects and potential ECB rate cuts persist. The rebound is attributed to a weakening US Dollar ahead of the release of the US Q2 GDP data.
Despite the recovery, the Euro’s near-term outlook remains uncertain due to expectations of further rate cuts by the ECB. The central bank is anticipated to implement two more rate cuts this year in response to persistent price pressures and a slowdown in economic activity, particularly in Germany.
Germany’s weak economic performance, highlighted by the unexpected contraction in the flash Composite PMI for July and the decline in the IFO Business Climate index, has reinforced these rate cut expectations. In an effort to stimulate consumption, the German government has also announced a substantial tax relief package.
Market Focus:
Traders are closely watching the release of US Q2 GDP data, which is expected to show accelerated growth. However, a deceleration in the GDP Price Index could bolster expectations of rate cuts by the Federal Reserve. The upcoming Durable Goods Orders data for June and the crucial Personal Consumption Expenditures Price Index (PCE) for June will also be in focus.
The PCE inflation data, the Fed’s preferred inflation gauge, is particularly significant as it will provide insights into whether market expectations for a September rate cut are justified.
Technical Analysis:
The EUR/USD pair has returned within the Symmetrical Triangle formation on a daily timeframe after failing to sustain a breakout. While the pair is currently trading below the 20-day Exponential Moving Average (EMA), it could potentially slide further towards support levels at 1.0800 and 1.0700. The 14-day Relative Strength Index (RSI) has returned to a neutral range, indicating a fading bullish momentum.
The round-level resistance at 1.0900 remains a key barrier for Euro bulls to overcome.