- This week’s main events include the Fed policy meeting and the NFP.
- The probability of a Fed rate cut this week is below 5%.
- The ECB’s Schnabel said rising service prices in the eurozone remain a significant problem.
The EUR/USD outlook is pointing south, with the dollar firming ahead of Wednesday’s Federal Reserve policy meeting. Meanwhile, ECB policymakers have painted a mixed picture of the prospects for a rate cut by the European Central Bank.
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Markets are gearing up for several big events this week, including the Fed’s policy meeting and US non-farm payrolls. Meanwhile, the eurozone will release key inflation data that shape the outlook for an ECB rate cut. Data showed on Friday that US inflation rose slightly, in line with expectations. As a result, markets are still expecting the first reduction in September. Meanwhile, the probability of a decrease this week is below 5%.
At the Fed’s policy meeting, officials may highlight inflation’s progress toward its 2% target. However, there may be caution about the resilience of the US economy. Continued strength gives the Fed more room to wait for inflation to fall. Still, investors are confident that policymakers will demand a rate cut in September.
Meanwhile, inflation is at 2.5% in the eurozone, approaching the ECB’s 2% target. However, the central bank kept rates on hold in July due to high services inflation. The ECB’s Isabelle Schnabel pointed out on Friday that the central bank faces a challenging task to reduce inflation. According to her, the rise in service prices remains a significant problem.
However, other policymakers are poised for cuts in September. Meanwhile, ECB President Christine Lagarde said September remains wide open, meaning anything could happen, depending on incoming data.
EUR/USD key events today
Neither the US nor the Eurozone will release high-impact economic data today. Therefore, the pair could be consolidated.
Technical Outlook EUR/USD: Solid support at 1.0825
On the technical side, the decline in EUR/USD is paused at the support level of 1.0825. Recently, the price was in a corrective move that retested the 30-SMA resistance. With the SMA holding tight, the price bounced lower with an impulse candle. However, the bears must break below 1.0825 to make a lower low and confirm the downtrend.
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Notably, the RSI is showing weaker bearish momentum near 1.0825. If the bears fail to break below, the trend could reverse, with the price breaking above the SMA. However, if the bearish momentum increases, the downtrend will continue with a target of 1.0750.
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