Bulls pause before the next catalyst

EUR/USD Current Price: 1.1160

• The German IFO survey came in better than expected, but did not support the euro.
• US durable goods orders doubled expectations in July.
• EUR/USD could correct the downside in the short term, but bulls hold on.

EUR/USD has declined from recent highs around 1.1200 despite persistent risk appetite. The two came together on Friday following Federal Reserve (Fed) Chairman Jerome Powell’s comments at the Jackson Hole Symposium. Powell continued to pave the way for a rate cut in September, saying “the time has come for policy to adjust.” As usual, he maintained a dose of caution, adding that the timing and pace of rate cuts will depend on “incoming data, the evolution of the outlook and the balance of risks.”

However, financial markets were quick to price lower borrowing costs in the United States (US). As a result, Wall Street posted solid gains while the US dollar fell against most major rivals. The new week, however, brought an extra dose of caution as the US will release the Personal Consumption Expenditure (PCE) Price Index, the Fed’s favorite inflation gauge, later this week. If the numbers show a further reduction in inflationary pressures, market players are likely to increase bets on a rate cut of 50 basis points (bps). So far, the uncertainty revolves around the depth of the September cut.

Meanwhile, Germany released August’s IFO Business Climate Index, which was printed at 86.6, down from 87 in July, though better than the 86.5 expected. Expectations also beat the forecast, hitting 86.8, while the current situation rating fell from 87.1 to 86.5.

Across the pond, the US released durable goods orders in July, which rose 9.9% for the month, much better than the 4% expected. The positive news from the US had no relevant impact on the USD.

EUR/USD short-term technical outlook

The EUR/USD pair is trading in the 1.1160 price zone after the release of the US data. Technical readings on the daily chart suggest that the bulls have paused, but are also in control. The pair is trading well above all of its moving averages, with the 20 Simple Moving Average (SMA) maintaining an almost vertical slope around 1.0980. The 100 and 200 SMAs, meanwhile, advanced only marginally well below the shortest. Finally, the technical indicators are holding well above the median lines, although they lack directional strength.

The 4-hour chart shows that a bullish 20 SMA is providing near-term support at around 1.1145, while the longer moving averages retain bullish strength despite being below the 1.1000 threshold. Technical indicators, meanwhile, ease sharply but remain above the midline, limiting the chances for a steeper decline.

Support levels: 1.1145 1.1100 1.1065

Resistance levels: 1.1210 1.1250 1.1290