- The euro rose to a 17-month high as the dollar hovered close to a one-year low.
- Data last week revealed a further decrease in US inflation.
- The largest economy in the eurozone might experience a more substantial contraction this year.
Today’s EUR/USD outlook is bullish. The euro rose to a 17-month high as the dollar hovered close to a one-year low. Investors were uncertain as they awaited new developments to determine if the dollar would continue to decline.
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Notably, the dollar experienced its worst performance for 2023 last week, as data revealed a further decrease in US inflation. Consequently, there is less pressure on the Federal Reserve to continue raising interest rates.
Currency strategist Carol Kong from the Commonwealth Bank of Australia expressed her belief that the dollar will remain under selling pressure. Moreover, she cited a market focus on the conclusion of the Federal Open Market Committee’s tightening cycle.
However, Money markets have already factored in a 25-basis-point rate hike by the Fed during its upcoming policy meeting later this month. Still, they also anticipate a rate reduction as early as December. In contrast, investors anticipate that the European Central Bank still has more ground to cover regarding its rate-hike cycle. This is pushing the euro higher.
On Monday, the German Bundesbank stated that Germany might experience a more substantial contraction this year than the previously estimated 0.3% decline. This is despite a small rebound in the second quarter.
With its strong presence in industries, Germany is particularly affected by the decrease in global demand for goods, influenced by higher borrowing costs. The International Monetary Fund (IMF) also projected a slight shrinkage in Germany’s economic output for this year.
EUR/USD key events today
With the release of retail sales data, investors will get a glimpse of consumer spending in the US. Higher sales would indicate increased consumer spending, while the opposite is true.
EUR/USD technical outlook: Buyers set their sights on 1.1300.
The EUR/USD has made a new high on the 4-hour chart and is swiftly approaching the 1.1300 resistance level. The uptrend is progressing, and the bullish bias is strengthening as the price trades higher above the 30-SMA. Furthermore, the RSI is overbought, indicating solid bullish momentum.
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However, we might see a pause at the 1.1300 resistance level to allow bulls to rest. Such a pause would likely resemble the pause above the 1.1200 key level.
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Saqib Iqbal
