EUR/USD Price Analysis – Sep 30, 2024

Daily Price Outlook

Despite the downbeat flash annual Consumer Price Index (CPI) data from six German states showing a continued slowdown in inflation, the EUR/USD currency pair is maintaining its upward momentum, climbing to around 1.1193 and even reaching an intra-day high of 1.1208.

This rise can be largely attributed to a weakening US dollar, which is losing strength as traders look ahead to Federal Reserve Chair Jerome Powell's upcoming speech at 17:00 GMT.

Easing Inflation in the Eurozone Sparks Rate Cut Speculation Ahead of ECB Meeting

On the EUR side, recent data indicates that six German states experienced a further slowdown in inflation for September, as the flash annual Consumer Price Index (CPI) showed a decline in price growth.

Although month-on-month inflation increased at a quicker pace than in August, it still fell within the modest 0.2% range.

Moreover, data released on Friday from France and Spain revealed that price pressures also rose at a slower-than-expected rate, strengthening the belief that inflation is easing across the Eurozone.

This trend could be a positive sign for consumers and the broader economy as it suggests that price stability is gradually returning.

This slowdown in inflation has sparked rising expectations that the European Central Bank (ECB) may cut interest rates in its upcoming meeting on October 17.

Market participants have ramped up their bets, now pricing in a roughly 75% chance of a rate cut, a significant increase from just 25% a week ago.

It's worth noting that the ECB had already lowered its Deposit Facility Rate by 25 basis points to 3.5% during its policy meeting on September 12.

These developments suggest that the central bank is closely monitoring economic conditions and may take further action to support growth.

Moving ahead, investors are anticipating the release of the preliminary Harmonized Index of Consumer Prices (HICP) data for Germany and the Eurozone later this week. Furthermore, ECB President Christine Lagarde's speech scheduled for 13:00 GMT today is expected to shed light on the potential interest rate cut trajectory for the rest of the year.

US Dollar Pressure and Potential Rate Cuts: Impact on EUR/USD Pair

On the US front, the broad-based US dollar is facing downward pressure as investors await Federal Reserve Chair Jerome Powell's speech scheduled for 17:00 GMT. Many are hoping for clues about possible interest rate cuts at the Fed's upcoming November meeting.

According to the CME FedWatch tool, there's currently a 41.6% chance of the Fed reducing interest rates by 50 basis points to a range of 4.25% to 4.50%.

However, this probability has slipped from about 53.0% last Friday, following the release of the August Personal Consumption Expenditures Price Index (PCE) report. On the data front, the latest PCE report revealed that annual inflation unexpectedly fell to 2.2%, down from July’s 2.5%.

This marks the lowest inflation reading since February 2021. However, core PCE inflation, which excludes volatile food and energy prices, rose to 2.7%, raising concerns about the need for cautious rate cuts moving forward.

Recently, Fed policymakers have shifted their focus toward preventing job losses and economic slowdowns, expressing confidence that inflation will eventually return to the 2% target.

As a result, investors are closely monitoring upcoming economic indicators, including the JOLTS Job Openings for August and the ADP Employment Change and Nonfarm Payrolls (NFP) figures for September, as these will provide valuable insights into the health of the labor market.

Therefore, the easing inflation in the US, alongside cautious Fed signals, may strengthen the EUR/USD pair as the probability of rate cuts increases, attracting investors seeking higher yields in the Eurozone.

EUR/USD - Technical Analysis

EUR/USD is currently trading at $1.11937, reflecting a modest gain of 0.03% as it hovers above the pivot point at $1.1184. The pair has been in a steady upward trajectory, suggesting mild bullish sentiment in the near term.

Immediate resistance is observed at $1.1200, followed by $1.1214 and $1.1232, making these levels critical for further upward momentum. A break above $1.1214 could lead to a test of $1.1232, indicating a stronger bullish continuation.

On the downside, immediate support lies at $1.1171, with subsequent levels at $1.1150 and $1.1133. The 50-day Exponential Moving Average (EMA) is positioned at $1.1166, indicating that the pair is trading above its short-term trend line and suggesting continued bullish momentum.

However, the Relative Strength Index (RSI) is at 61, nearing overbought territory, which could limit further gains unless there is a strong catalyst, such as positive economic data from the Eurozone or dovish commentary from the Federal Reserve.

From a technical perspective, traders may consider long positions above $1.1184, targeting resistance at $1.1214 and setting a stop-loss around $1.1169 to manage risk.

The focus will be on key economic releases, such as the Eurozone inflation data and U.S. employment numbers, which could significantly influence the pair’s direction in the coming days.

For now, the EUR/USD remains supported above $1.1184, but any break below this pivot point could shift sentiment to bearish, bringing $1.1150 back into play as a key support level. Until then, the pair looks poised to test resistance levels as it sustains its upward momentum.

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