- EUR/USD steadies near 1.1740 after a sharp midweek drop.
- Dollar strength stems from firmer U.S. data and cautious Fed guidance.
- Markets await the release of US GDP and PCE inflation data to confirm the Fed’s next steps.
The EUR/USD forecast tilts to the downside as the price saw a 0.6% decline on Wednesday, primarily driven by rising demand for the dollar. The selloff came as the US new home sales data soared to the highest level since 2022, reinforcing the view that the American economy remains resilient despite signs of cooling.
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Meanwhile, Fed officials, including Chairman Powell, stressed the need for cautiousness in easing policy, underscoring a balance between soft labor markets and elevated inflation. The combination of upbeat US data and restrained rhetoric has dampened bets for steeper rate cuts, providing fresh support to the greenback.
In Europe, the scenario remains gloomier as the German IFO sentiment and consumer climate indices posted dismal figures, suggesting weakening business activity and household confidence. The euro is struggling to find a footing amid weaker growth prospects. Meanwhile, the banks remain split on the outlook, as Danske forecasts a scope for the dollar to rebound, while MUFG and ING anticipate the EUR/USD to grind higher towards 1.2000 if the Fed proceeds with the rate cuts as expected.
Key Events Ahead: US Core PCE, GDP
The immediate focus remains on US GDP, durable goods orders, and weekly jobless claims data, all of which are due today in the New York session. However, the real test comes on Friday with the Core PCE data, which is expected to post a 0.3% month-over-month and a 2.7% year-over-year gain. A hotter reading would challenge the odds of two more cuts this year.
EUR/USD technical forecast: Bears aiming to crack 200-MA
The EUR/USD 4-hour chart shows room for further fall towards the 200-period MA at 1.1700 as the rising channel has been broken and retested. However, the interim support at swing lows of 1.1720 could resist the bears. On breaking below the 200-period MA, the bears could further pick up momentum and lead towards the ultimate support level of 1.1575.
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On the upside, the 1.1775 remains a tough nut to crack for the buyers ahead of 1.1830, while the ultimate target for the buyers remains 1.2000. The recent downside is considered corrective with better buying opportunities on dips.
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