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  • The US Dollar Index goes into consolidation near mid-94s.
  • Markets wait for White House to announce 10% tariffs on Chinese imports.
  • Inflation in the euro area rises 2% in August to match July’s reading.

The EUR/USD pair gained traction in the second half of the day on Monday and advanced toward the 1.17 handle to erase all of the losses it recorded on Friday. However, the pair struggled to preserve its momentum in the late NA session and went into a consolidation phase. At the moment, the pair is up 0.57% on the day at 1.1690.

Earlier today, the data released by the Eurostat showed that the inflation measured by the CPI in the euro area rose 0.2% and 2% on a monthly and yearly basis respectively. The core-CPI, which strips volatile food and energy prices, came in at 1% on an annual basis in August to match July’s reading and meet the market expectation.  

On the other hand, New York Fed’s closely-watched Empire State Manufacturing Index fell to 19 in September from 25.6 in August and fell short of the analysts’ estimate of 23. The selling pressure surrounding the greenback strengthened following the data and dragged the index to a new daily low of 94.44. As of writing, the index was down 0.5% on the day at 94.48. In the meantime, investors are waiting for the White House to announce a 10% tariff on $200 billion worth of Chinese imports.

In an interview with CNBC, White House economic advisor Kudlow stated the announcements on tariffs could be coming soon and added that the U.S. wouldn’t rule out a trade deal with China.

On Tuesday, the European economic docket won’t be featuring any significant data releases from the eurozone and investors will be looking at ECB President Mario Draghi’s speech for fresh impetus.

EUR/USD technical outlook via FXStreet Chief Analyst Valeria Bednarik

The short-technical picture for the pair is positive, although with limited momentum, as in the 4 hours chart, the pair bounced after buying interest defended the 1.1620/30 region, where the 100 SMA in the mentioned chart converges with the 23.% retracement of the August rally. In the same chart, the pair is holding above a bullish 20 SMA but technical indicators lost their upward strength and turned lower within positive levels, suggesting that buyers are not ready to push the price through the 1.1730 resistance area, but far from indicating an upcoming bearish leg. The key resistance is 1.1724, August monthly high, with a break above it probably resulting in a steeper recovery.  

Support levels: 1.1660, 1.1620, 1.1570.

Resistance levels: 1.1725, 1.1750, 1.1785

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