EUR/USD falls slightly below 1.1150 as investors brace for ECB Lagarde speech

EUR/USD faces selling pressure above 1.1150 in Friday’s North American trading hours. The major currency pair drops as the US Dollar (USD) bounces back. The US Dollar Index (DXY), which gauges the Greenback’s value against six major peers, recovers sharply to near 101.00

However, the broader outlook of the US Dollar remains uncertain, following the Fed’s bumper interest rate cut decision and increasing market expectations that the US central bank will continue with an aggressive policy-easing cycle. The Fed reduced interest rates by 50 basis points (bps) as policymakers seem to focus on reviving labor market strength as inflation is declining to the bank’s target of 2%.

On the interest rate guidance, Fed policymakers see the federal fund rate heading to 4.4% by year-end, according to the latest dot plot. However, traders expect interest rates to decline further, by 75 bps to 4.00%-4.25%, according to the CME FedWatch tool.

The preliminary consumer confidence reading for the Eurozone will be published at 14:00 GMT. Expectations are for a slight improvement of the index, to -13 in September from -13.5 in August.

In Friday’s New York session, US investors will focus on Philadelphia Fed Bank President Patrick Harker’s speech at 18:00 GMT for fresh guidance on interest rates.

Daily digest market movers: EUR/USD faces pressure as US Dollar rebounds

• EUR/USD struggles to sustain above 1.1150 in Friday’s North American session. The major currency pair faces pressure as the US Dollar bounces back. While the Euro (EUR) performs strongly against other major peers amid growing speculation that the European Central Bank (ECB) will leave its Deposit Facility rate unchanged at 3.5% in its October monetary policy meeting.
• A few ECB policymakers have voiced their willingness to follow a gradual policy-easing approach as they want to see more evidence pointing to a slowdown in inflationary pressures. This week, ECB policymakers such as Governing Council member Peter Kazimir, Executive Board Member Isabel Schnabel, and President of Deutsche Bundesbank Joachim Nagel said that price pressures are still higher than where the bank wants them. Most latest, ECB Isabel Schnabel said on Thursday that sticky services inflation is keeping headline inflation at an elevated level.
• In the European trading hours, the comments from ECB Vice President Luis de Guindos also indicated that he wants to see more good inflation data before slicing interest rates furtehr. Guidos said, "We will have more information in December than in October."
• For fresh guidance on interest rates, investors will focus on ECB President Christine Lagarde’s speech, which is scheduled at 15:00 GMT. In her latest comments at ECB policy’s press conference on September 12, Lagarde refrained from proving a pre-defined interest rate cut path.
• "The interest rate decisions will be based on its assessment of inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation, and strength of monetary policy transmission," she said.

Technical Analysis: EUR/USD holds gains above 20-day EMA

EUR/USD struggles to hold trade above 1.1150 in North American trading hours. The near-term outlook of the shared currency pair remains upbeat due to the upward-sloping 20-day Exponential Moving Average (EMA) near 1.1088.

The major currency pair remains firm as it has confidently recovered after retesting the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological support of 1.1000. 

The 14-day Relative Strength Index (RSI) moves higher above 60.00. A bullish momentum would trigger if it sustains above the aforementioned level.

Looking up, the round-level resistance of 1.1200 will act as a major barricade for the Euro bulls. A decisive break above the same would drive the asset toward July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones.