EUR/USD pulls back, unable to hold 1.10

EUR/USD

FXStreetAug 7, 2024 12:42 AM

EUR/USD eased on Tuesday despite recovering risk sentiment.
Markets have leaned back into risk appetite on Fed rate cut hopes.
Euro-area data soured early Tuesday, calendar looks thin for Wednesday.

EUR/USD trimmed recent gains and slipped back from the 1.1000 handle on Tuesday as markets continue to digest a recent rebalancing in FX market flows. Investors have recovered their footing and resumed betting on an uptick in the pace of rate cuts from the Federal Reserve (Fed) beginning in September. Pan-EU economic data did little to meaningfully move the needle on Tuesday, with a mid-tier release schedule on the cards for Wednesday.

Forex Today: Markets’ attention remains on data and rate cut bets

Pan-EU Retail Sales contracted -0.3% YoY in June, entirely missing the forecast 0.1% and falling from the previous period’s revised 0.5%. German Industrial Production figures are due on Wednesday, expected to recover to 1% growth MoM in June from the previous period’s -2.5% contraction.

Rate markets have fully priced in a September rate cut, and according to the CME’s FedWatch Tool, investors see two-to-one odds of a double cut for 50 basis points when the Federal Open Market Committee (FOMC) delivers its rate call on September 18. At the current cut, rate markets see zero chance of the Fed holding rates steady anymore in 2024, with a total of four quarter-point cuts expected by the end of the year.

EUR/USD technical outlook

Fiber traders have pulled back from 1.1000 after a failed bull run into the major price handle, and price action is poised to collapse back into a rough descending channel on daily candlesticks. EUR/USD has been mired in choppy consolidation around the 200-day Exponential Moving Average (EMA) for most of 2024, and the trend is set to continue as near-term momentum pivots once against into the bearish side. Short side targets will be set at the 1.0800 level, with sellers hoping to crack through and take a fresh run at the last major swing low below 1.0700.

EUR/USD daily chart

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