Daily Price Outlook

The USD/JPY currency pair witnessed some buying interest on Tuesday but has been struggling to make significant gains. It is currently trading around 147.70, up just slightly for the day. Notably, the pair reached its highest level since November 2022 last week but has not been able to maintain that momentum.

However, traders seems cautious and staying on the sidelines as they await important central bank events this week, particularly the Federal Reserve (FOMC) and the Bank of Japan (BoJ) rate decisions. These events are seen as crucial, and investors are holding off on making big moves until they have more clarity on central bank policies.

At the time of writing, the USD/JPY currency pair is trading at 147.68 level and consolidating in the range between 147.50 - 147.93.

Fed Expected to Maintain Cautious Stance: Impact on USD/JPY

It's worth noting that the Federal Reserve is set to announce its decision on Wednesday, and most people expect them to keep things as they are. However, the market believes that the Fed will stick to its more cautious approach, keeping interest rates relatively high for an extended period. This expectation is keeping US Treasury bond yields up, which, in turn, is helping the US Dollar (USD) stay strong. As a result, the USD/JPY pair is benefiting, with the USD holding its ground after a recent dip from a six-month high. This all suggests ongoing support for the USD/JPY currency pair.

USD/JPY Traders Cautious Amid BoJ Speculation

Another factor affecting the USD/JPY currency pair's gains is the speculation surrounding a potential shift in the Bank of Japan's (BoJ) dovish stance. BoJ Governor Kazuo Ueda recently hinted in an interview with Yomiuri newspaper that they might consider ending their negative interest rate policy if they become confident that prices and wages will continue rising steadily. This statement has raised expectations that the BoJ could gradually move away from its ultra-loose monetary policy, creating uncertainty in the market and causing some traders to hold back on placing bullish bets on the USD/JPY pair.

Looking forward, all eyes are on the Bank of Japan (BoJ) policy meeting set for Friday. Investors await signals about the BoJ's plans regarding its negative interest rate policy, which could significantly impact the Japanese Yen and reshape the direction of the USD/JPY currency pair. Moreover, US housing market data like Building Permits and Housing Starts will also offer short-term trading opportunities.

USD/JPY - Technical Analysis

The USD/JPY pair demonstrates consistent movement around the 147.86 mark, encountering challenges in surpassing it. Notably, the stochastic oscillator is now exhibiting a positive convergence, potentially propelling the pair to breach the aforementioned level and aim for our subsequent target at 149.00.

The prevailing bullish channel underpins the anticipated upward trajectory, contingent upon the price's ability to remain stable above the 147.30 threshold. For today, we project a trading range between the support level of 147.00 and a resistance at 148.70.

Daily Price Outlook

During the first half of the European trading session, the price of gold (XAU/USD) managed to maintain a positive stance for the second consecutive day. It is currently trading around $1,925, showing a slight increase of just over 0.10%. However, this positive performance is mainly due to a modest decline in the US dollar and cautious market sentiment that favors safe-haven assets like gold. Nevertheless, the potential for further gains remains limited as traders are awaiting the upcoming interest rate decisions from major central banks scheduled for this week. These decisions are likely to have a significant impact on the direction of gold prices.

Impact of a Weakening US Dollar on Gold Prices

The broad-based US dollar failed to maintain its upward stance, slipping from its recent six-month high. However, this decline in the dollar is good news for the price of gold. Although the losses in the US dollar might not last long as traders are showing reluctance to take big risks. They prefer to wait for the Federal Reserve's (Fed) upcoming monetary policy update. This cautious approach is keeping the US dollar-denominated price of gold from making significant gains.

It is worth noting that the Fed is set to announce the results of its two-day monetary policy meeting soon, and it's widely expected to keep things as they are. However, the market is still considering the possibility of a minor 0.25% interest rate increase later this year, possibly in November or December.

Therefore, investors will closely watch Fed Chair Jerome Powell's remarks during the post-meeting press conference for hints about future interest rate increases. This will significantly impact the short-term value of the US dollar and could influence the price of gold.

Global Factors Driving Gold Demand

Besides that, the ongoing worries about a possible shutdown of the US government and the worsening property problems in China are supporting the demand for safe-haven precious metals. Specifically, China Evergrande Group has postponed a decision on how to deal with its debt issues, adding to concerns in the market.

Therefore, the news of a potential US government shutdown and China's property crisis has boosted the demand for safe-haven assets like gold. Meanwhile, the uncertainty surrounding these issues has made investors seek refuge in gold, leading to an increase in its price as a result of heightened demand for the precious metal.

This week, investors will also pay attention to decisions from other major central banks: the Swiss National Bank (SNB) and the Bank of England (BoE) on Thursday, and the Bank of Japan (BoJ) on Friday. Additionally, on Tuesday and Wednesday, the latest consumer inflation data from Canada and the United Kingdom (UK) could create trading opportunities for XAU/USD.

GOLD(XAU/USD) - Technical Analysis

Gold demonstrates a pronounced bullish inclination, targeting the $1,929 mark. This aligns with the prospects of persisting positive momentum, with an initial goal set at $1,945.20.

Today's forecast leans towards a bullish stance, bolstered by the price movement above the EMA50. However, this momentum might encounter intermittent lateral shifts influenced by the stochastic downturn.

Conversely, it's pivotal to acknowledge that any inability to surpass $1,929 could instigate a price regression towards the $1,913.15 territory. Today's anticipated trading span oscillates between the support at $1,920 and resistance at $1,945.20.

Daily Price Outlook

During early European trading on Monday, the EUR/USD pair prolonged its upward rally and drew some further bids around the 1.0675 mark. However, this upward momentum can be attributed to disappointing consumer sentiment data from the United States (US) released the previous Friday. Furthermore, the pullback in US bond yields is putting downward pressure on the US Dollar (USD), contributing to the gains in the EUR/USD currency pair. It's worth noting that the potential for further upside in this major pair appears limited as investors await the Federal Reserve (Fed) interest rate decision scheduled for Wednesday.

Mixed US Economic Indicators Impact Dollar's Performance

According to the preliminary data, the US Michigan Consumer Sentiment Index for September dropped to 67.7, showing a decline from the previous reading of 69.5 and falling below the expected 69.1. The US Dollar Index (DXY), measuring the US Dollar against other major currencies, ended the week with a slight gain of 0.26%. However, the current price is lower, around 105.30. In addition, US Treasury yields have completely reversed their earlier gains, which is pressuring the US Dollar further. As of now, the yield on the US 10-year bond has dropped to 4.32%.

Furthermore, the previosuly released economic data from the US consistently showed that the economy is doing well. These strong signs make it more likely that the US Federal Reserve (Fed) will raise interest rates again by the end of 2023. The Consumer Price Index (CPI), which measures inflation, came in higher than expected. Retail Sales for the same month and Jobless Claims for the second week of September also showed good results, suggesting a positive outlook for the US economy.

Investors will keep a close eye on the Fed's interest rate decisions scheduled for Wednesday. While the Fed is expected to keep rates steady, people will be listening closely to what the central bank says, hoping to get hints about future rate changes.

ECB's Monetary Policy Stance and Potential Impact on EUR/USD

In contrast to the US, European Central Bank (ECB) President Christine Lagarde stated on Friday that the ECB is not considering cutting interest rates further. She also mentioned that the ECB plans to keep interest rates high for a while and might even raise them if necessary, showing a cautious but flexible approach. Hence, Lagarde's statement of no further rate cuts and potential rate hikes by the ECB can strengthen the Euro (EUR) against the US Dollar (USD), potentially boosting the EUR/USD pair.

EUR/USD - Technical Analysis

The EUR/USD pair is currently exhibiting a sideways movement, gravitating around the 1.0660 mark. It's noteworthy that the stochastic indicator shows waning positive momentum, transitioning into a negative overlap. This could potentially serve as a catalyst for the price to reinforce its bearish trajectory, targeting a break below 1.0635, which would further signal a descent towards the 1.0515 zone.

Consequently, our prevailing forecast leans towards a bearish outlook, underpinned by the downward pressure exerted by the EMA50. It's essential to underscore that a breach above 1.0685 might pivot the price towards an upward journey, aiming to touch 1.0725 and potentially stretching up to 1.0785 before considering any subsequent decline. The day's anticipated trading corridor is delineated between the support at 1.0570 and resistance at 1.0725, with the predominant sentiment for the day being bearish.

Daily Price Outlook

The GBP/USD currency pair failed to stop its declining streak and experienced a two-day decline, trading around 1.2380 during the European session on Monday. However, this decline is driven by upcoming interest rate decisions in the US and the UK, which are making traders cautious. In the US, the Federal Reserve is expected to maintain current interest rates in its upcoming meeting, but there is a possibility of slight rate increases later in 2023, strengthening the US dollar (USD) and putting pressure on GBP/USD.

Conversely, the Bank of England (BoE) is anticipated to raise UK interest rates slightly in its upcoming meeting, potentially boosting the British pound (GBP) while also introducing market uncertainty.

Influence of Central Banks and Economic Data on GBP/USD

It is worth noting that the US Federal Reserve (Fed) is likely to keep interest rates unchanged in its upcoming meeting on Wednesday. Investors are keenly watching for any hints about future rate changes. However, the market is currently factoring in a 0.25% rate increase by the end of 2023. Although, the USD faced some pressure due to disappointing US consumer sentiment data. The preliminary Michigan Consumer Sentiment Index for September was 67.7, lower than the previous 69.5 and the expected 69.1.

Hence, the news of the likely unchanged interest rates from the US Federal Reserve and the weaker US consumer sentiment data have the potential to put downward pressure on the USD, which could support the GBP/USD pair.

Factors Affecting GBP/USD Traders

Another factor influencing GBP/USD traders is the expectation that the Bank of England (BoE) will raise interest rates by 0.25% in its upcoming Thursday meeting. The BoE aims to combat rising inflation and maintain UK economic stability. However, BoE Governor Andrew Bailey's recent statement suggests that the bank may be nearing the end of its rate-hike cycle.

This, coupled with concerns about a potential recession and signs of a slowing UK job market, might push the BoE to reconsider future rate hikes. Investors will also closely monitor key economic data like the Consumer Price Index (CPI), Core CPI, and Producer Price Index (PPI) for August, set to be released on Wednesday.

Looking forward, traders will keep a close eye on US Building Permits data. These releases could provide trading opportunities within the GBP/USD pair, as they offer insights into the US housing market's health and can influence currency movements.

GBP/USD - Technical Analysis

The GBP/USD pair has reaffirmed its downward trajectory, consolidating beneath the 1.2400 threshold. This strengthens the forecast for an ongoing primary bearish trend, paving the way towards our primary anticipated target of 1.2310.

The current bearish channel meticulously frames the projected downtrend, which receives consistent reinforcement from the EMA50. It's important to highlight that a breach of 1.2435 could propel the price towards challenging the crucial resistance at 1.2505 before embarking on another bearish maneuver. Today's anticipated trading parameters are set between a support of 1.2300 and resistance at 1.2450.

Daily Price Outlook

The GBP/USD pair is holding steady in a tight range near 1.2490. It's struggling to break above the 1.2500 mark due to upcoming US economic data. However, the pair's recent decline can be attributed to a mix of factors, including downbeat UK data and a strong US dollar.

Challenges in UK Economy and BoE's Caution

The UK's unemployment rate rose to 4.3% from 4.2%, with 207,000 job losses in July, causing concerns about a recession. Despite this, the Bank of England worries about high wages fueling inflation, as earnings grew by 8.5%. The GDP unexpectedly shrank by 0.5% in July. A BoE policymaker, Catherine Mann, believes it's too early to stop raising interest rates, but this stance is worrying investors and putting pressure on the British Pound (GBP), affecting its exchange rate with the US Dollar (USD).

US Inflation Surges in August, Impact on Fed's Decision

Apart from this, the US Bureau of Labor Statistics reported in August the highest monthly inflation increase in 14 months. The Consumer Price Index (CPI) rose by 0.6% from the previous month, exceeding expectations, and showed an annual increase of 3.7%. The core CPI, excluding food and energy prices, also increased by 0.3% month-on-month, with an annual rise of 4.3%.

While many expect the Federal Reserve (Fed) to keep interest rates unchanged at the upcoming FOMC meeting, these numbers indicate that the Fed should stay alert to the possibility of inflation picking up in the coming months. Currently, there's a 97% probability of no rate change in September, but there's a 49.2% chance of a rate hike in November, according to the CME Fedwatch Tool.

Thus, the rising US inflation and the potential for future interest rate hikes has put upward pressure on the US Dollar (USD) against the British Pound (GBP). This has led to a decline in the GBP/USD currency pair as investors seek the strength of the USD.

Market Outlook for GBP/USD Amid Upcoming US Data

Looking forward, with no UK economic data on Wednesday, the GBP/USD pair will be influenced by USD movements. Traders await US data like weekly Initial Jobless Claims, the Producer Price Index (PPI), and monthly Retail Sales. On Friday, the preliminary Michigan Consumer Sentiment Index for September will be key. These releases may guide GBP/USD trading.

GBP/USD - Technical Analysis

The GBP/USD pair experienced a pronounced downtrend yesterday, successfully reaching our anticipated target of 1.2400 and currently hovering around this mark. We anticipate further potential decline, with the next significant target positioned at 1.2310.

This bearish outlook remains dominant, reinforced by the EMA50 which exerts downward pressure on the price. It's imperative to note that for the bearish momentum to persist, the price should remain below 1.2505. Today's projected trading range lies between a support level of 1.2320 and a resistance level of 1.2480.

Daily Price Outlook

During the early trading hours of Friday's European session, the gold price (XAU/USD) continued to climb, reaching around $1,920 per troy ounce. However. this upward trend is mainly influenced by positive data from China and new fiscal stimulus measures. Furthermore, gold price gained further strength as the US Dollar (USD) retreated from its six-month high, providing additional support for the precious metal.

Moving on, traders seem cautious to place any strong position ahead of the release of the US preliminary Michigan Consumer Sentiment Index during the North American session.

China's Positive Data Boosting Gold Prices

It is worth noting that China's positive economic data, coupled with the recent move by the People's Bank of China (PBoC) to reduce the Reserve Requirement Ratio (RRR) by 25 basis points (bps), is boosting market optimism and supporting gold prices. In August, China's Retail Sales (year-on-year) surged by 4.6%, surpassing the expected 3.0% increase and improving upon the previous month's 2.5% figure. Besides this, Industrial Production also outperformed, growing by 4.5% in August, compared to the estimated 3.7% rise in July. These robust numbers are contributing to the strength in gold prices.

US Dollar and Economic Data Impact on Gold Prices

The broad-based US dollar has stepped back from its recent six-month high and is now trading around 105.20. However, a significant drop in the dollar is likely because investors are cautious in response to the US Federal Reserve's (Fed) tough stance on monetary policy. In addition, US Treasury yields have bounced back, with the 10-year bond yield reaching 4.30% at the moment. These higher yields could give a boost to the USD.

However, the anticipation of the Fed's commitment to a stricter monetary policy, possibly involving more interest rate hikes and tightening measures, is expected to deter them from making any big investments in assets like gold. In the short term, the dollar's movements will continue to be influenced by monetary policy decisions and Fed communications.

Moreover, the recent US economic data has generally been positive. For the week ending September 8, Initial Jobless Claims came in better than expected at 220,000 new claims, showing a slight improvement from the previous week's 217,000. In August, the Core Producer Price Index (PPI) matched expectations with a 2.2% increase, though it was slightly lower than the previous 2.4% rise. Retail Sales also improved, rising by 0.6% compared to the previous month's 0.5%, beating the expected slowdown to 0.2%.

Thus, these numbers suggest a healthy US economy, which can influence market sentiment and trading decisions. Hence, the positive US economic data may pressure gold prices as it boosts confidence in the economy, reducing the appeal of safe-haven assets like gold.

GOLD(XAU/USD) - Technical Analysis

Gold commenced the trading session exhibiting evident bullish momentum, surpassing the $1,913.15 threshold and nearing the retest of the previously breached neckline of the head and shoulders pattern, which now stands as a pivotal resistance at $1,917.50. It's noteworthy to mention that the 50-day Exponential Moving Average (EMA50) aligns with this resistance level, reinforcing its significance and suggesting the potential for a renewed downtrend.

Given the current scenario, a prudent strategy would be to adopt a wait-and-see approach until there's a decisive breach of one of the critical levels mentioned, thereby offering greater clarity on the impending trajectory. A descent below the $1,913.15 support could indicate the reassertion of the bearish trend, with subsequent objectives at $1,890.00 and then $1,873.50.

Conversely, a breakthrough of the $1,917.50 resistance may negate the adverse implications of the pattern, paving the way for gold to ascend and target gains commencing at $1,929.00. The anticipated trading bandwidth for the day is projected between a support of $1,900.00 and resistance at $1,930.00.

Daily Price Outlook

The global market sentiment remains positive as US equity markets head into the Friday closing session with significant gains. However, this reason for its upward trend can be attributed to the consistent positive US economic data, which shows that the US economy is doing better than expected. Investors are feeling positive and are no longer worried about an economic downturn in the US. They believe that the US economy is strong enough to handle challenges.

This can be witnessed by the positive performance of S&P 500, a key equity index. This renewed confidence is fueling the upward trajectory in the world's largest economy, instilling optimism in markets worldwide. It's worth noting that the S&P 500 made a strong move, reaching $4,500, thanks to positive US producer price index data that showed a 0.7% increase in August.

Positive US Economic Data and Outlook for Upcoming Reports

According to recent US economic data, the outlook is positive. For the week ending September 8, there were 220,000 new jobless claims, slightly better than the previous week's 217,000. In August, the Core Producer Price Index (PPI) rose by 2.2%, matching expectations and just below the previous 2.4% increase. Retail sales also improved, rising by 0.6% compared to the previous month's 0.5%, beating the expected 0.2% slowdown. These numbers suggest the US economy is in good shape, which can impact sentiment in the stock market and trading decisions.

Looking forward to Friday's economic calendar in the US, investors are hoping for more positive data. They are keeping an eye on consumer expectations, industrial production, and the NY Empire State manufacturing index. The initial reading of the Michigan Consumer Sentiment Index is expected to dip slightly from 69.5 to 69.1. Industrial Production for August is predicted to slow down significantly, dropping from 1% to just 0.1%. As for the NY Empire State Manufacturing Index, it's expected to improve but still stay in the negative zone, with a forecast of -10 compared to the previous -19. These upcoming numbers will be closely watched by the market.

Positive Economic News and Market Confidence Boost in China

Furthermore, the data from the National Bureau of Statistics (NBS) in China brings positive news. In the meantime, the recent decision by the People's Bank of China (PBoC) to cut the Reserve Requirement Ratio (RRR) by 25 basis points (bps) is boosting market confidence. China's Retail Sales (year-on-year) surged by 4.6% in August, surpassing the expected 3.0% increase and improving upon the previous month's 2.5% figure. Moreover, Industrial Production did even better, with a 4.5% growth rate in August, outperforming the estimated 3.7% rise seen in July. These numbers are certainly encouraging for the market.

S&P500 (SPX) - Technical Analysis

Upon scrutinizing the technical nuances of the S&P 500, the index displays volatility around the $4,500 mark. Delving into the four-hour chart, the S&P 500 has staged a comeback from a critical support pegged at $4,470. The candlestick configurations hint at a possible upward trajectory for the index.

Should the S&P 500 sustain above this threshold, it is poised to confront the ensuing formidable resistance near $4,500. Beyond this, another significant resistance coincides with the 61.8% retracement mark, intensified by a 61.8% extension.

On the flip side, if the S&P 500 descends below the $4,470 benchmark, ensuing supports are likely at $4,450 and $4,335. The linchpin remains the pivotal $4,400 support, serving as today's fulcrum. A position above this point insinuates a potential bullish continuation, whereas a breach below might signal augmented selling activity.

Daily Price Outlook

Gold prices (XAU/USD) inched higher during the Asian session on Thursday, marking a potential end to a two-day losing streak that had pushed the precious metal to nearly a three-week low, settling in the range of $1,906 to $1,905. The yellow metal initially made an attempt to recover from its recent losses in the Asian trading hours. However, as the European session began, it faced additional downward pressure, causing it to trade slightly lower, hovering around the $1,900 per troy ounce mark. However, this decline in gold's value is likely attributed to the release of upbeat Consumer Price Index (CPI) data from the United States (US), which has exerted pressure on the precious metal, keeping it near its three-week lows.

Fed Meeting and Economic Data Impact on the US Dollar and Gold Prices

Market participants seems confident that the Federal Reserve will not raise interest rates at its upcoming meeting, as long as there are no big surprises in the US consumer inflation numbers. This makes the US dollar weaker and gives a little boost to the price of Gold price.

According to the US Bureau of Labor Statistics, in August, the Consumer Price Index (CPI) in the US rose to 3.7% from a year ago, slightly higher than expected. The core CPI, which excludes things like food and fuel, increased by 4.3%. This indicates that inflation is still above the desired level, leading to speculation that the Federal Reserve might raise interest rates once more before the year ends. There's a greater than 50% chance this could happen in either November or December. If the Fed does raise rates, it could benefit the US Dollar but might limit the rise in Gold prices. This is something aggressive Gold traders should be careful about.

The US Dollar Index (DXY) is bouncing back, currently trading at around 104.70. This recovery is due to higher US Treasury yields, with the 10-year bond yield sitting at 4.25%. Although, investors are thinking that the US Federal Reserve (Fed) will likely keep its easy-money policies at its September meeting. This cautious approach might put pressure on the US Dollar.

Key Economic Data Releases Ahead: PPI and Retail Sales for August

Looking forward, investors are waiting for the Core Producer Price Index (PPI) and Retail Sales numbers for August in the US. These figures can tell us a lot about how the economy is doing. They'll be especially important for assets like Gold.

GOLD(XAU/USD) - Technical Analysis

The gold price maintains its position below $1,913.15, in anticipation of factors that could reinforce the price's trajectory towards the projected downward trend for the day. This inclination is influenced by the previously established head and shoulders pattern. It's worth noting that our projected targets commence at $1,890.00 and may reach down to $1,873.50.

The 50-day Exponential Moving Average (EMA50) backs the forecasted bearish movement, which will persist as the dominant prediction unless there's a breach surpassing the $1,913.15 mark, further solidified if it surpasses $1,916.80 and sustains above these thresholds.

Today's anticipated trading bandwidth is set between a support level of $1,875.00 and a resistance level at $1,920.00.

Daily Price Outlook

During the Asian session on Thursday, the USD/JPY pair faced selling pressure, breaking its two-day winning streak and sliding to around 147.75 after hitting a weekly high. However, the decline can be attributed to expectations that the Bank of Japan (BoJ) will shift away from its ultra-easy monetary policy, boosting the Japanese Yen (JPY) and weighing on the pair. Furthermore, the ongoing uncertainty surrounding the Federal Reserve's rate-hike plans is leading to US Dollar selling, further contributing to the pair's downward movement.

BoJ Policy Shift Boosts JPY Strength

It is important to note that the Japanese Yen is gaining strength due to expectations that the Bank of Japan (BoJ) will move away from its super-easy monetary policy. This is putting pressure on the USD/JPY currency pair. It should be noted that people in the market are now thinking that the central bank might stop its policy of controlling interest rates and negative rates as early as this year. This came after the BoJ Governor Kazuo Ueda's comments over the weekend. He hinted that they might raise interest rates if they're confident that prices and wages will keep rising. This caused Japanese government bond yields to go up, supporting the JPY and contributing the USD/JPY currency pair.

Market Uncertainty Impacts USD/JPY Pair

Across the ocean, the ongoing uncertainty about the Federal Reserve's future interest rate hikes is causing some US Dollar selling, which is affecting the USD/JPY pair. However, the recent US consumer inflation data suggests the Fed will keep rates steady at its upcoming meeting. Notably, inflation remains a concern, leaving the possibility of another rate increase by year-end. Market pricing suggests a greater than 50% chance of a 0.25% rate hike in either November or December. This could stop USD bears from aggressive selling and help limit losses for the USD/JPY pair.

Looking forward, traders will keep thier eyes on key US economic reports, including Weekly Jobless Claims, the Producer Price Index (PPI), and monthly Retail Sales. These releases could provide new momentum for the USD/JPY currency pair.

USD/JPY - Technical Analysis

The USD/JPY pair has decisively surpassed the 146.90 threshold, signaling a resurgence of the primary bullish trajectory. This movement is in line with the bullish channel delineated on the chart, enhancing the probability of eclipsing the recent peak of 147.86 and steering towards the 149.00 region as the forthcoming key target.

The 50-day Exponential Moving Average (EMA50) lends positive reinforcement to the pair, underscoring the anticipated upward trend in subsequent sessions. However, it's crucial to note that a breach below the 146.90 mark, followed by a drop past 146.35, could thwart the projected ascent and redirect the pair back to a corrective bearish path.

For today, the trading spectrum is projected to oscillate between a support at 146.70 and resistance at 148.20.

Daily Price Outlook

The EUR/USD currency pair continued to rise, reaching around 1.0750 in early European trading on Thursday. Despite positive US inflation data, traders are focusing on the European Central Bank (ECB) interest rate decision. Most expect the ECB to keep rates unchanged in September. However, recent market sentiment suggests a 65% chance of a rate hike, likely the last in a cycle that began in July 2022. Investors will listen closely to ECB President Lagarde's speech later in the day. If ECB officials sound more hawkish (favoring rate hikes), the Euro could gain strength against the US Dollar, benefiting the EUR/USD pair. Thereby, the news of a potential ECB rate hike has led to uncertainty in the EUR/USD pair. If the ECB hints at rate hikes, the Euro may strengthen against the US Dollar.

US Inflation in August Sparks Concerns and Rate Hike Speculation

According to data released on Wednesday, the United States experienced its highest monthly inflation increase in 14 months during August. The Consumer Price Index (CPI) surged by 0.6% compared to the previous month, surpassing expectations, and marked an annual increase of 3.7%. The core CPI, which excludes volatile food and energy prices, also rose by 0.3% on a monthly basis, with an annual increase of 4.3%. While market expectations lean toward the Federal Reserve (Fed) maintaining interest rates at the upcoming FOMC meeting, these figures signal the Fed should remain watchful for potential future spikes in inflation.

Hence, there is a 97% probability of no rate change in September, but a 49.2% chance of a rate hike in November, according to the CME Fedwatch Tool.

Upcoming Market Events: ECB Decision and US Data

Looking ahead, market watchers will pay close attention to the ECB's interest rate decision and ECB President Lagarde's press conference at 12:45 GMT. Besides this, Thursday will bring the release of US weekly Initial Jobless Claims, the Producer Price Index (PPI), and monthly Retail Sales. These important events could spark significant fluctuations in the market, providing traders with potential opportunities when dealing with the EUR/USD pair.

EUR/USD - Technical Analysis

The EUR/USD pair displays indications of continued downward movement. Current observations note a negative correlation in the stochastic oscillator, bolstering the likelihood of an extended bearish trend for the day, with a primary target set at 1.0635.

Our analysis maintains a bearish outlook for subsequent sessions only if it manages to break below 1.07207 level. For today, we project a trading range with support at 1.0660 and resistance at 1.0810.