- The EUR/USD pair fell on Friday, continuing a three-day streak of declines.
- EU inflation did not bring any surprises, US PCE inflation maintained equilibrium in terms of interest rates.
- Next week: the final US NFP employment data ahead of the next Federal Reserve interest rate decision.
EUR/USD tilted further into the red on Friday, extending its downward move for a third straight day and pulling Fiber lower to 1.1050 to end the trading week. EU inflation data released early on Friday impressed no one in particular, and the US Consumer Price Expenditure (PCE) index fell compact of forecasts, keeping broad market bets on interest rate cuts pointed straight at the Federal Reserve’s (Fed’s) next interest rate call on September 18.
US PCE data for July did not bring any significant surprises to end the trading week. MoM core PCE inflation in the US held at 0.2%, in line with expectations, but year-on-year core PCE inflation held at 2.5%, while an boost to 2.6% was expected.
Interest rate markets are holding firm on a 30% chance of an initial double 50bp cut by the Federal Reserve (Fed) on September 18, with the remaining 70% leaning toward a single quarter-point cut. Overall, interest rate traders are pricing in 100bp in total cuts in 2024, according to CME’s FedWatch Tool.
With PCE inflation data out of the way and giving no warning signs, the way is cleared for next week’s Nonfarm Payrolls (NFP) print, one of the last key economic data points standing in the way of the Fed and interest rate-cutting markets. Next week will also start quietly, with U.S. stock markets set to remain closed for Labor Day. Some Purchasing Managers Index (PMI) releases are also scattered throughout the trading week.
EUR/USD Price Forecast
The third bearish factor has Fiber entering a bearish pullback phase, with EUR/USD now halfway to the nearest technical level at the 50-day exponential moving average (EMA), rising below 1.0950.
While the EUR/USD pair is still trading in a bullish zone north of the 200-day EMA at 1.0855, the bids have caused Fiber to fall sharply from the yearly highs reached earlier this week, and the downside momentum could pick up.
