Additional earnings in progress

• EUR/USD advanced to new 2024 highs around 1.1080 on Monday.
• The dollar weakened further and fell to multi-month lows.
• Next up is the final EMU inflation rate ahead of the FOMC minutes.

EUR/USD extended its gains for a second day in a row earlier in the week, hitting fresh 2024 highs around 1.1080, driven by continued weakness in the US dollar (USD).

On the latter, the Greenback accelerated its retreat and fell below key 102.00 support to print fresh multi-month lows as measured by the US Dollar Index (DXY) as investors continued to see the Reserve The Fed began its easing cycle in September.

Following the CPI release, expectations for a half-point rate cut by the Fed next month have eased, with a smaller rate cut now seen as more likely. That view was also supported by better-than-expected results in other key US states fundamentally.

Speaking of rate cuts, CME Group’s FedWatch tool puts the likelihood of a 25 bps rate cut at nearly 77%.

While the European Central Bank (ECB) has remained silent, Fed policymakers are expected to share their views as the September meeting approaches. In that regard, Neel Kashkari, the president of the Minneapolis Fed, suggested that it is appropriate to consider the possibility of a Fed interest rate cut in September, citing the increasing likelihood of a weak labor market.

Should the Fed opt for further rate cuts, the policy gap between the Fed and the ECB could narrow over the medium to long term, potentially supporting further EUR/USD growth, especially as market participants anticipate two more interest rate cuts by the ECB right now. year.

However, in the longer term, the US economy is expected to outperform Europe, suggesting that any sustained weakness in the greenback could be short-lived.

Data from the CFTC Positioning Report showed that non-trading (speculative) EUR net longs retreated to two-week lows in the week ended August 13.

Looking ahead, the FOMC minutes will be the most important data released this week, although investors are expected to closely watch Chairman Jerome Powell’s Jackson Hole speech as well as BoJ Governor Kazuo Ueda’s testimony before Parliament.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further north, EUR/USD is likely to test the 2024 high of 1.1083 (August 19) before reaching the December 2023 peak of 1.1139 (December 28).

On the downside, the pair’s next target is the 200-day SMA at 1.0842, then the weekly low of 1.0777 (August 1) and the June low of 1.0666 (June 26), both of which occur before the May low of 1.0649 (May). 1).

Looking at the big picture, the pair’s uptrend should continue, provided it stays above the crucial 200-day SMA.

So far, the four-hour chart shows a considerable increase in the positive bias. The initial resistance level is 1.1083, which comes before 1.1132. On the downside, there is immediate support at 1.0949 ahead of 1.0881 and the 200-SMA of 1.0888. The Relative Resistance Index (RSI) rose after 77.