EUR/USD: Timid buying returns amid soft US data

EUR/USD Current price: 1.1163

• US Consumer Confidence unexpectedly plummeted in September.
• Speculative interest increases bets of another 50 bps rate cut from the Fed.
• EUR/USD trimmed Monday’s losses and aims to extend its advance.

The EUR/USD pair trimmed Monday’s losses and finished Tuesday at around 1.1160, benefiting once again from the broad US Dollar’s weakness. The Euro failed to attract investors throughout the first half of the day, as European data came out worse than anticipated.

The German IFO survey on Business Climate unexpectedly fell in September to 85.4, easing from the 86.6 posted in August. The assessment of the current situation deteriorated to 84.4, while expectations declined to 86.3, as expected. The US Dollar, on the other hand, got hit by United States (US) data as CB Consumer Confidence plummeted to 98.7. August's reading was upwardly revised from 103.3 to 105.6. Additionally, the Present Situation sub-component fell by 10.3 points to 124.3, while the Expectations Index declined by 4.6 points to 81.7 but remained above 80.

The figures fueled speculation the  Federal Reserve (Fed) could cut interest rates by 50 basis points (bps) when it meets in November, underpinning stocks yet adding pressure on the USD through the American session.

The macroeconomic calendar will remain light on Wednesday, as the EU will not release relevant figures, while the US will publish weekly MBA Mortgage Applications and August New Home Sales.   

EUR/USD short-term technical outlook  

The EUR/USD pair aims to extend its advance, although its upward strength remains limited. In the daily chart, the pair continued to develop above a flat 20 Simple Moving Average (SMA), which provides dynamic support at around 1.1090. Technical indicators, in the meantime, ticked north but remain below their recent highs and close to their midlines. Finally, the 100 SMA keeps advancing above a mildly bullish 200 SMA, both far below the current level.

In the near term, the risk of an upward extension increased. In the 4-hour chart, the pair recovered above all its moving averages, with the 20 SMA gaining upward traction well above the longer ones. The Relative Strength Index (RSI) indicator turned higher and currently stands at around 58, supporting a bullish movement, while the Momentum indicator heads nowhere at around its 100 level.

 Support levels: 1.1120 1.1090 1.1050  

Resistance levels: 1.1200 1.1250 1.1290