- The dollar fell ahead of more inflation data from the US.
- The euro could end the month with a loss of 1%.
- Markets will pay attention to Thursday’s presidential debate.
The EUR/USD price analysis turned bullish as the euro strengthened against a weak dollar. However, the pair retreated slightly on Tuesday as political uncertainty continued to weigh on the eurozone currency ahead of French elections. Investors were also focused on Thursday’s US presidential debate.
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The euro got some relief on Monday as the dollar fell ahead of new US inflation data. However, the outlook for the currency remains murky as French elections begin on Sunday. There was concern in the market that the new government could increase spending, worsening the already weak financial situation. As a result, the euro could end the month with a 1% loss.
On the other hand, the US elections will come in November. However, markets will pay attention to Thursday’s presidential debate, which could weigh on the dollar.
Elsewhere, investors raised bets on a Fed rate cut in September since May’s inflation data. Moreover, while Friday’s PMI data revealed further expansion in the manufacturing and services sectors, the survey also showed a decline in inflation. Therefore, price pressures are on a downward trend, which could pressure the Fed to start cutting interest rates.
However, policymakers remain cautious as they wait for more data to gain confidence that the downward trend will continue. Accordingly, the PCE price index, which is the Fed’s preferred measure of inflation, will significantly influence the policy outlook. Economists predict a decline that would fuel bets on a rate cut and weaken the dollar.
EUR/USD key events today
- Consumer Confidence USA CB
EUR/USD price technical analysis: channel breakout signals change sentiment to bullish
On the technical side, the EUR/USD price has broken out of its bearish channel, indicating a possible reversal. In addition, the price broke above the 30-SMA, indicating a change in sentiment to the bullish side. At the same time, the RSI is now trading in bullish territory above 50.
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This change in sentiment came after the RSI made a bullish divergence with price. This was a sign that the bearish momentum was weak. Moreover, the price made a double bottom at the key level of 1.0680, showing that the bears can no longer make lower lows. If the price stays above the 30-SMA, it will soon return to the resistance level at 1.0800.
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