- The dollar fell after Fed minutes confirmed expectations of a September Fed rate cut.
- Eurozone business activity strengthened in August.
- Agreed wage growth in the eurozone moderated in the second quarter.
The EUR/USD outlook is bullish as the dollar remains fragile after the Fed minutes. However, the euro oscillated on Thursday morning following mixed economic reports from the eurozone.
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The overall trend for EUR/USD remained up as Fed minutes confirmed expectations of a September Fed rate cut. Policymakers were poised to start cutting borrowing costs if economic data met expectations. July inflation data was released after the Fed’s policy meeting and showed an expected easing to 2.9%. Therefore, the Fed is holding back a bit from cutting interest rates. As a result, the dollar fell, allowing the euro to reach new highs.
Meanwhile, data on Thursday showed that eurozone business activity strengthened in August, further boosting the euro. Composite PMI rose to 51.2 from July’s 50.2, while economists had expected the figure to fall to 50.1. This report eased pressure on the European Central Bank to cut interest rates.
However, a separate report found that agreed wage growth in the eurozone slowed in the second quarter. The number dropped from 4.74% to 3.55%. This is a key measure for the ECB and affects the prospects for a rate cut. Sluggish wage growth is reducing economic demand, putting pressure on the central bank to reduce borrowing costs.
Currently, markets are implying an over 90% probability of an ECB rate cut in September. Moreover, the central bank could cut again in December.
EUR/USD key events today
- US unemployment claims
- US manufacturing PMI
- US flash services PMI
Technical outlook EUR/USD: Indecision signals a pullback
On the technical side, the EUR/USD price paused its growth near the resistance level at 1.1150. The bulls moved sharply from the 30-SMA, breaking above the resistance level. The bullish bias has strengthened with price well above the 30-SMA and RSI in the overbought region.
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However, price action is showing indecision at the 1.1150 level after such a strong move. Price made small-bodied candles with a large wick, indicating that neither bears nor bulls are strong. It also indicates the exhaustion of the previous move. Therefore, the price may soon fall to retest the 30-SMA support.
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