EUR/USD Forecast: Bulls pause ahead of the next catalyst

EUR/USD Current price: 1.1160

• The German IFO survey came in better than anticipated but fell short of supporting the Euro.
• The United States Durable Good Orders more than doubled expectations in July.
• EUR/USD could correct lower in the near term, but bulls hold the grip.

The EUR/USD pair eases from its recent highs at around 1.1200 despite persistent risk appetite. The pair rallied on Friday following comments from Federal Reserve (Fed) Chairman Jerome Powell at the Jackson Hole Symposium. Powell kept paving the way for a September interest rate cut, saying that “the time has come for policy to adjust.” As usual, he maintained a dose of caution, adding that the timing and pace of rate cuts will depend on “  incoming data, the evolving outlook, and the balance of risks.”

Nevertheless, financial markets rushed to price in lower borrowing costs in the United States (US). As a result, Wall Street posted solid gains, while the US Dollar edged lower against most major rivals. The new week, however, brought an additional dose of caution, as the US will publish later this week the Personal Consumption Expenditures (PCE) Price Index, the Fed’s favorite inflation gauge. Should the figures show further easing inflationary pressures, market players will likely increase bets on a 50 basis points (bps) rate cut. So far, uncertainty gyrates around the depth of the September cut.

In the meantime, Germany published the August  IFO Business Climate index, which printed at 86.6, easing from 87 in July, although better than the 86.5 expected. Expectations also beat the forecast, hitting 86.8, while the assessment of the current situation eased from 87.1 to 86.5.

Across the pond, the US released July Durable Goods Orders, which rose 9.9% in the month, much better than the 4% expected. The positive US news had no relevant impact on the USD.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the 1.1160 price zone following the release of American data. Technical readings in the daily chart suggest that bulls paused, but also that they retain control. The pair trades far above all its moving averages, with the 20 Simple Moving Average (SMA) maintaining an almost vertical slope at around 1.0980. The 100 and 200 SMAs, in the meantime, advanced just marginally well below the shorter one. Finally, technical indicators hold well above their midlines, although missing directional strength.

The 4-hour chart shows that a bullish 20 SMA provides near-term support at around 1.1145, while longer moving averages retain their bullish strength, although they are below the 1.1000 mark. Technical indicators, in the meantime, ease sharply but remain above their midlines, limiting the odds for a steeper decline.

Support levels: 1.1145 1.1100 1.1065

Resistance levels: 1.1210 1.1250 1.1290