- During last week's trading, the bears tried hard to push the EUR/USD price below the support level of 1.0800 to further confirm the strength of the downtrend.
- The losses stopped at the support level of 1.0825 and closed this week's trading stable around the level of 1.0855.
- This performance will be on an important and fateful date this week, as the US jobs numbers and the US Federal Reserve's policy decisions will be announced, in addition to the announcement of the inflation numbers for the Eurozone.
According to the economic calendar of last week, the US Federal Reserve's preferred inflation measure remained low last month, which reinforced evidence that price pressures are steadily easing, and set the stage for the Fed to start cutting US interest rates in September. The US Commerce Department said on Friday that prices rose by only 0.1% from May to June, up from the previous month's reading, which remained flat. Compared with a year earlier, inflation fell to 2.5% from 2.6%.
Excluding volatile food and energy prices, so-called core inflation rose 0.2% from May to June, up from 0.1% in the previous month. Measured against a year ago, core prices rose 2.6%, unchanged from June. Economists closely monitor core prices, which typically provide a better reading of future inflation trends.
Overall, Friday's figures indicate that the worst US inflation streak in four decades, which peaked two years ago, is nearing its end. In this regard, Federal Reserve Chairman Jerome Powell said that cooling price data this summer boosted his confidence that inflation would return sustainably to the central bank's 2% target. At the same time, lower interest rates and weaker inflation, coupled with a still-strong labor market, could improve Americans' assessment of the economy and impact this year's presidential race between Vice President Kamala Harris and former President Donald Trump.
A report on Friday also showed that U.S. consumer spending rose in June. So did incomes, even after adjusting for inflation. The report noted that a rare “soft landing,” in which the Federal Reserve manages to slow the economy and inflation with higher borrowing rates without triggering a recession, is happening — so far.
Consumer spending rose 0.3% from May to June, slightly less than the previous month’s 0.4% gain. Incomes rose 0.2%, down from 0.4% in May. Friday’s report said median income, adjusted for inflation, rose 1% from a year ago, though that figure slowed from 1.9% at the start of the year. With the pace of hiring slowing and the economy growing at a steady, if not robust, pace, the Federal Reserve is all but certain to cut its benchmark interest rate when it meets in mid-September. Meanwhile, the U.S. central bank will meet first this week. Furthermore, Powell is expected to say after that that Fed policymakers still want to see additional data to confirm that inflation is slowing.
However, the U.S. central bank is likely to signal this week that it is getting closer to lowering borrowing costs.
In Europe, major reports on GDP and inflation will be released for major economies including the Eurozone, Germany, France, Italy, and Spain. The Eurozone GDP is expected to expand by 0.3% in the second quarter, the same as in the first quarter. Also, growth in Germany is expected to slow to a modest 0.1%, down from 0.2%. The annual inflation rate in the Eurozone is expected to fall to 2.3%, its lowest level in three years, while inflation in Germany is expected to remain steady at 2.2%.
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EUR/USD Technical analysis and forecast:
Technically, we expect a quiet trading session for the EUR/USD price performance and within its bearish environment. As we mentioned before, breaking the 1.0800 support will remain an important target for the bears to move further down. Strictly, the EUR/USD may remain in its current range until the reaction to the US Federal Reserve announcement and the US jobs numbers. By returning to the bullish outlook, the bulls should push the EUR/USD currency pair above the psychological resistance of 1.1000.
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