EUR/USD Forecast: Still range-bound, but not for long

EUR/USD Current Price: 1.0204

• Volatility remains limited as investors await US first-tier data.
• The US Consumer Price Index rate is expected to have eased to 8.6% YoY in July.
• EUR/USD is mildly bullish, but chances of a rally are limited as long as it stays below 1.0280.

The EUR/USD pair retreated from an intraday high of 1.0247 and holds on to modest intraday gains in the 1.0200 price zone. The greenback gathered momentum during US trading hours, although action across the FX board remained limited as investors await US first-tier inflation figures, which may determine what’s next on monetary policy.

The US inflation rate, measured by the Consumer Price Index, is expected to have contracted from a multi-decade high of 9.1% YoY in June to 8.6%. However,  the core reading for the same period is foreseen advancing to 6.1% from the current 5.9%. Ahead of the event, Germany will publish the final estimate of July CPI, expected to confirm annual inflation at 7.5%.

The US Federal Reserve usually takes its decision based on the core PCE inflation index and does not particularly care about the CPI. However, the latter does affect financial markets as speculative interest bases its decisions on it.

Data-wise, the EU macroeconomic calendar remained empty on Tuesday, while the US has just released Q2 Nonfarm Productivity, which decreased by 4.6% QoQ, and Unit Labor Cost for the same period, up 10.8%, both beating the market’s expectations. Additionally, the August IBD/TIPP Economic Optimism fell to 38.1 from 38.5 in the previous month.

EUR/USD short-term technical outlook

The EUR/USD pair trades around 1.0205, the 38.2% retracement of its latest daily slide. A critical Fibonacci resistance level is the 50% retracement of the same decline at 1.0280, as the pair has been meeting sellers around it since mid-July. Technically, the daily chart shows a mildly bullish stance, as the price continues to develop above a bullish 20 SMA, while technical indicators bounced from around their midlines, maintaining modest upward slopes.

The near-term picture is neutral, according to the 4-hour chart. The pair is contained between moving averages, with the 20 and 100 SMA containing the downside around the 1.0200 threshold, and the 200 SMA capping the upside. At the same time, the Momentum indicator advances within positive levels, but the RSI indicator remains flat at around 53, reflecting the absence of directional strength.

 Support levels: 1.0150 1.0105 1.0070

Resistance levels: 1.0240 1.0280 1.0325  

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