EUR/USD pulls back after failing to break above the immediate resistance of 1.1080 during Tuesday’s European session. The currency pair declines as the US Dollar (USD) maintains gains, approaching a two-week high, with the US Dollar Index (DXY), which measures the Greenback against six major currencies, hovering around 101.80.
The Dollar remains strong as investors focus on the upcoming US Nonfarm Payrolls (NFP) data for August, set to be released on Friday. This labor market data is crucial for predicting the potential size of the Federal Reserve’s (Fed) interest rate cut in the September policy meeting. Market sentiment leans toward the Fed shifting to policy normalization this month.
The CME FedWatch Tool shows a 31% chance of a 50-basis point rate cut in September, while the remaining probabilities favor a 25-basis point reduction, bringing rates to 5.00%-5.25%. The likelihood of a larger cut has dropped from 36% a week earlier, especially following the revised estimate for the second-quarter Gross Domestic Product (GDP), which showed the US economy grew at 3% instead of the preliminary 2.8%.
On Tuesday, investors will be closely monitoring the US S&P Global and ISM Manufacturing PMI data for August, scheduled for release at 13:45 and 14:00 GMT, respectively. The S&P Global PMI is projected to remain at 48.0, consistent with the flash estimate.
Meanwhile, the ISM Manufacturing PMI is expected to indicate a slower contraction in manufacturing activities, with a reading of 47.5, up from the previous 46.8.
EUR/USD remains within Monday’s trading range, stabilizing below the key resistance of 1.1100. The pair's near-term outlook is still positive, with all short-to-long-term Exponential Moving Averages (EMAs) trending upward.
Previously, the pair gained momentum after breaking above the Rising Channel formation on the daily chart.
The 14-day Relative Strength Index (RSI) has pulled back below 60.00 after reaching an overbought level near 75.00.
On the upside, a move toward the recent high of 1.1200 and the July 2023 peak at 1.1275 is anticipated for Euro bulls. On the downside, support is expected around the psychological level of 1.1000.
