EUR/USD rebounds sharply on Thursday’s New York session after declining to a seven-week low near 1.0665 the day before. The major currency pair finds support as the US Dollar (USD) corrects amid uncertainty ahead of the United States (US) core Personal Consumption Expenditures (PCE) Price Index data for May, which will be published on Friday. However, the near-term demand remains vulnerable amid fears of widening policy divergence between the US Federal Reserve (Fed) and the European Central Bank (ECB).
The US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major peers, faces pressure in an attempt to move above the crucial resistance of 106.00.Â
Investors will pay close attention to the US core PCE inflation data, which will provide cues about when and how much the Fed will reduce interest rates this year. The US PCE report is expected to show that core price pressures grew at a slower pace of 0.1% month-on-month in May against 0.2% in April. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April.Â
Softer-than-expected inflation figures would boost expectations of early Fed rate cuts, which would be unfavorable for the US Dollar. On the contrary, hot numbers will diminish Fed rate-cut prospects.
Currently, financial markets expect that the Fed will start reducing interest rates at the September meeting and deliver subsequent rate cuts in November or December.
On the economic front, US Durable Goods Orders for May unexpectedly rose by 0.1%. Economists forecasted them to have declined by 0.1% after an expansion of 0.6%, downwardly revised from 0.7%. Fresh orders for Durable Goods are a leading indicator of core Consumer Price Index (CPI) data. Meager growth in New Orders for Durable Goods doesn’t pose significant upside risks to price pressures.
EUR/USD trades inside WednesdayÂ’s range as investors sidelined ahead of the US core PCE inflation reading. The downward-sloping border of the Symmetrical Triangle pattern formation on a daily timeframe remains a major barrier for the Euro bulls. A fresh downside would appear if the pair delivers a decisive breakdown of the above-mentioned chart pattern.
The shared currency pair establishes below the 200-day Exponential Moving Average (EMA) near 1.0780, suggesting that the overall trend is bearish.
The 14-period Relative Strength Index (RSI) hovers near 40.00. A bearish momentum would trigger if the oscillator slips below this level.
The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity. Generally speaking, a high reading is bullish for the USD.
Last release: Thu Jun 27, 2024 12:30
Frequency: Monthly
Actual: 0.1%
Consensus: -0.1%
Previous: 0.7%
Source: US Census Bureau
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