Piece Written By Mfanafuthi Mhlongo, Trive Financial Market Analyst 

The EURUSD is edging higher as the dollar retreated ahead of the PCE price index, which is the Fed’s preferred inflation measure but remained on track for its biggest weekly decline since early May. The euro staged a recovery, but uncertainty lingers as investors speculate on the European Central Bank’s tightening cycle. The recent interest rate hike marked the ninth consecutive increase, but President Lagarde’s hints at a possible pause in rate hikes in September caused turbulence in the currency market.  

Meanwhile, European GDP and CPI data showed mixed signals, with Spain and France showing sustained growth while the German economy stagnated. Inflation rates also played a role, with slowdowns in Germany and France and an unexpected rise in Spain’s rate. As the Fed raised rates and forecasted a “soft landing,” the EURUSD pair remains volatile, with the 1.1000 level serving as a key test for further movements. The euro is currently trading at 1.1003, up 0.2% on the day. It is on track for a weekly decline of around 1.5%. 

Looking at the US Dollar Index (DXY): 

The 4H chart shows that the US dollar might be under firm bearish pressure ahead of the PCE data due later today after the greenback’s recovery faltered at the 61.80% Fibonacci retracement level during the session.  

The continued decline of the greenback could continue to push the EURUSD cross higher, with the index likely to find reliable support at the 50-EMA (blue line) and the 38.20% Fibonacci retracement level. 

Técnicos 

The 4H chart below shows that the pair currently finds itself trading at 1.10071, showcasing resilience amidst the weakening dollar and as it looks to sustain a break above the 61.80% Fibonacci retracement level. However, the price action is below the 50-EMA (blue line), which could signal that bearish momentum still persists towards the pair. 

For a bullish case, trading opportunities could exist towards the 1.10688 resistance level should the PCE data help the price action sustain a break above the 61.80% Fibonacci retracement level, with the next target likely at the 1.11717 price level. Conquering these levels could pave the way for further bullish moves, with the major resistance level at 1.12758 (green line) likely acting as a level of interest for the bulls. 

Should the PCE data come in hotter-than-expected, the EURUSD can find support at the 1.09056 price level, where an immediate foundation awaits. However, a break below the level would leave the support level at 1.08347, a fraction of the major support level at 1.06675 (red line), to guard against any significant downturn. 

Resumen 

The greenback is weakening ahead of the PCE data due later as the market hope for the report that will show that the inflationary pressures are easing, which would weigh on the US dollar and pave the way for the price action towards the 1.10688 and 1.11717 next. 

However, a hot inflation figure could boost the green, likely leaving the 1.09056 support level within the bears’ reach in the short term. 

Fuentes: TradingView, Reuters, Trading Economics