The EUR/USD has gained pace in its rebound, surpassing 0.9700 on Thursday. The pair holds its footing as data from Germany revealed that CPI inflation increased in September faster than anticipated. The US Q2 GDP data will be closely watched.
Technical Overview of EUR/USD
The four-hour Relative Strength Index (RSI) indicator remains close to 50, and the EUR/USD pair trades just above the 20-period SMA, which is now at 0.9635. The two could attempt to launch another comeback if this level holds. 0.9700 (psychological level) and 0.9740 (Fibonacci 38.2% retracement) serve as immediate resistance levels on the upward before 0.9670 (Fibonacci 23.6% retracement of the most recent downturn). Sellers may leave the market and allow for more gains if the pair can consolidate above that final resistance level.
First, support is formed by 0.9635 (20-period SMA), followed by 0.9600 (psychological level), then 0.9550. (static level, the end-point of the downtrend).
Fundamental Overview of EUR/USD
After gaining more than 100 pips on Wednesday, the EUR/USD went south and fell below 0.9700 early on Thursday. The pair needs to go higher and utilize 0.9740 as support to continue its comeback.
On Wednesday, EUR/USD gained traction due to widespread dollar selling pressure. The uptick impacted the dollar in market mood, and the pair managed to move higher throughout American trading hours. But on Thursday, safe-haven flows began to take control of the market, indicating that yesterday’s market activity was a long overdue correction. US stock index futures were down between 1.1% and 1.3% at publication, signaling a risk-averse market environment.
Several European Central Bank (ECB) officials have said they anticipate raising interest rates by 75 basis points in October, which will help the common currency maintain its competitiveness. Members of the ECB Governing Council Robert Holzmann and Gediminas Simkus agreed that the next policy meeting should see rates rise by 75 basis points. Mario Centeno, a dovish policymaker, said that he has not seen a deanchoring of inflation expectations in the euro region and warned against raising rates more quickly than necessary.
Investors anticipate that Germany’s annual Harmonized Index of Consumer Prices (HICP) will increase from 8.8% in August to 10% in September. Robust German inflation data should support the euro’s stability and vice versa.
The US Bureau of Economic Analysis will finalize the annualized Gross Domestic Product (GDP) growth for the second quarter public in the afternoon. Markets will likely disregard such data unless the GDP number is significantly revised.
The dollar may maintain its strength and make it challenging for EUR/USD to overcome the negative pressure if Wall Street’s major indexes suffer significant losses after the opening bell. Market players will be closely monitoring US equities.