In this article, we learned about the "Euro/USD Price Outlook: European Risks Accumulating Before NFP". Let's go
- EU inflation and the cautious tone of the European Central Bank have exacerbated downside risks
- EUR/USD seems fragile - can 200 SMA maintain its institutional positioning
- remains a net long, opening up the risk of continued EUR/USD selling
- This article's analysis utilizes chart patterns and key support and resistance levels. For more information, please visit our comprehensive education database
EU inflation and the cautious tone of the European Central Bank have exacerbated downside risks
On Thursday, the euro sold off after the market chose to closely monitor the more encouraging core inflation data in the eurozone rather than the slight increase in headline news. The core inflation rate is 5.3%, which is consistent with expectations, but has decreased from 5.5% last month. In addition, recent communication from European Central Bank rate setters indicates that the council will take a more cautious approach before next month's central bank meeting. Prior to Christina Lagarde's speech to delegates in Jackson Hole, unknown European Central Bank "sources" stated that hawks within the committee had relaxed their previous stance and that if the decision to raise interest rates or remain unchanged is well balanced, the European Central Bank may act cautiously. Earlier today, renowned hawk Isabel Schnabel
Elsewhere, the US PCE data was consistent with market consensus in both core and headline readings, both of which showed an increase compared to the previous month. The market is now looking forward to tomorrow's NFP report, which has attracted more expectations than before due to the accumulation of relatively small employment data in the early stages.
After a small decline in core inflation in Europe and a high PCE in the United States, the euro/dollar fell on Thursday. The pair briefly traded above 1.0910 and then gave up all yesterday's gains. Immediate support now appears at 1.0831, followed by the 200 day simple moving average However, since then, 1.0700 has appeared, which is still some distance from now. Of course, it is worth noting that year-end traffic may play a role in today's price discovery, so it is always necessary to consider this.
The current difficulty for the euro/dollar is that both currencies have vulnerabilities.
. Due to the slowdown in GDP outperformance and early signs of job market weakness, the US dollar has weakened - which the Federal Reserve believes is crucial for reducing inflation to 2%. Amidst the widespread decline in inflation rates, the euro also faces downside risks, and concerns about growth seem to be putting pressure on European Central Bank member states before next month's interest rate decision. Resistance returned to 1.0910, followed by 1.1012, which was the high point in June 2023.
EUR/USD daily chart
Source: TradeView, prepared by Richard Snow