Shy buying amid weak US data

EUR/USD Current Price: 1.1163

• US consumer confidence unexpectedly fell in September.
• Speculative interest is raising bets for another 50 bps rate cut from the Fed.
• EUR/USD pared Monday’s losses and looks to extend its advance.

The EUR/USD pared Monday’s losses and ended Tuesday at around 1.1160, once again benefiting from the general weakness of the US dollar. The euro failed to attract investors in the first half of the day as European data came in worse than expected.

Germany’s IFO business climate survey unexpectedly fell in September to 85.4, down from 86.6 posted in August. The current situation rating deteriorated to 84.4, while expectations fell to 86.3, as expected. The US dollar, on the other hand, was hit by data from the United States (US) as CB consumer confidence fell to 98.7. August’s reading was revised up from 103.3 to 105.6. Additionally, the Current Situation sub-component fell 10.3 points to 124.3, while the Expectations Index fell 4.6 points to 81.7 but remained above 80.

The figures fueled speculation that the Federal Reserve (Fed) could cut interest rates by 50 basis points (bps) at its November meeting, supporting stocks but adding pressure on the USD through the US session.

The macroeconomic calendar will remain light on Wednesday as the EU will not release relevant figures, while the US will release weekly MBA Mortgage Applications and New Home Sales in August.

EUR/USD short-term technical outlook

EUR/USD aims to extend its advance, although its upside remains limited. On the daily chart, the pair continued to develop above a 20 simple moving average (SMA), which provides dynamic support around 1.1090. Meanwhile, technical indicators have ticked north but remain below their recent highs and close to midlines. Finally, the 100 SMA continues to advance above a slightly bullish 200 SMA, both well below the current level.

In the near term, the risk of an upward expansion has increased. On the 4-hour chart, the pair has recovered above all of its moving averages, with the 20 SMA gaining upward traction well above the longer ones. The Relative Strength Index (RSI) indicator has risen and is currently around 58, supporting a bullish move, while the Momentum indicator is heading nowhere near its 100 level.

Support levels: 1.1120 1.1090 1.1050

Resistance levels: 1.1200 1.1250 1.1290