- Powell noted that recent inflation data has increased confidence that price pressures are easing.
- Markets are fully pricing in a Fed rate cut in September.
- Investors are gearing up for the ECB’s policy meeting on Thursday.
The EUR/USD outlook paints a bullish picture, with the dollar weak following Powell’s more dovish comments. Meanwhile, investors are gearing up for the US retail sales report later in the day. Moreover, anticipation is building ahead of the European Central Bank’s policy meeting on Thursday.
–Are you interested in learning more about Forex brokers? Check out our detailed guide-
Powell noted on Monday that recent inflation data had boosted confidence that price pressures were easing in a sustained manner. Consequently, inflation could soon reach the central bank’s target of 2%. More confidence among policymakers paves the way for rate cuts. As a result, after Powell’s comments, the markets completely discounted prices in September. Furthermore, investors expect the Fed to cut by 68 basis points this year.
However, this outlook could change as more data comes in as September is still a long way off. Investors will focus on the US retail sales report, which could show a 0.3% month-on-month decline. Weaker sales would indicate declining consumer spending, strengthening the case for a rate cut.
Meanwhile, investors are gearing up for Thursday’s ECB policy meeting, where the central bank is likely to keep rates on hold. However, traders will focus on Christine Lagarde’s comments for signs of future rate cuts. Inflation has eased since the last meeting. However, policymakers are concerned about services inflation, which remains high. Last week, a Reuters poll revealed that the ECB could cut rates in September and December. However, there is a chance that the central bank will reduce once.
EUR/USD key events today
- US Core Retail m/m
- USA retail m/m
EUR/USD Technical Outlook: Bearish RSI Divergence
On the technical side, the EUR/USD price paused near the key resistance level of 1.0900 after a strong bullish bounce. The 30-SMA is trading well below the price, showing a bullish trend. At the same time, the RSI is in bullish territory above 50.
–Are you interested in learning more about Crypto Signals Telegram Groups? Check out our detailed guide-
However, as the price made higher highs near 1.0900, the RSI made lower highs, indicating a bearish divergence. If the divergence shows, price is likely to pull back to retest the 30-SMA or lower. A break below the SMA would confirm a change in sentiment. However, if the bulls remain in control, the price could reach 1.0950.
Do you want to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
