The EUR/USD rebounded on Thursday, lifted by a broad-market selloff in the US Dollar. After a midweek pullback, the pair saw renewed momentum, benefiting from stronger-than-expected US economic data that helped ease concerns over a potential economic slowdown. Despite the recovery, the market remains cautious, with crucial inflation data due at the end of the week.
The recovery in EUR/USD was driven by a combination of positive US economic data and reduced recession fears. Durable Goods Orders for August held steady at 0.0%, outperforming the anticipated 2.6% contraction, while weekly Initial Jobless Claims fell to 218,000, better than the forecasted 225,000. These figures reinforced the narrative that the US economy is still on track for a soft landing, despite lingering concerns over weakening activity data.
However, the broader market remains on edge, as the US economy is not entirely out of the woods. Investors are waiting for Friday’s Personal Consumption Expenditure (PCE) inflation report, which is expected to be a critical test of the Federal Reserve’s recent monetary policy moves. Any significant deviation from forecasted inflation could shake up markets, especially in light of the Fed’s recent 50 basis-point rate cut. While some interpreted the cut as a preemptive move to support the labor market, others view it as a signal of deeper concerns about the economy.
On the European side, EUR traders are focusing on next week’s Harmonized Index of Consumer Prices (HICP) inflation data for September, set to release on Tuesday. This will offer insight into how inflation is evolving across the Eurozone, with implications for European Central Bank policy. In the near term, Friday’s pan-EU confidence indicators are expected to provide minimal surprises, with most figures likely to align with previous data.
Technically, EUR/USD remains capped below the 1.1200 level, as buyers struggle to push the pair higher. However, with support holding near the 50-day Exponential Moving Average (EMA) at 1.1040, the pair has room to continue its ascent if market conditions remain favorable. A breach above 1.1200 would signal a more significant upside move, but the lack of strong selling pressure has kept downside risks limited for now.
As markets await key inflation figures from both sides of the Atlantic, investors are carefully navigating a landscape where economic uncertainty persists but the worst-case scenarios have yet to materialize. The upcoming PCE inflation report on Friday and the HICP release next week will likely determine whether EUR/USD can maintain its upward momentum or face renewed selling pressure.
