EUR/USD aims to maintain its position above 1.0900 as market attention shifts to the US PPI data

EUR/USD is inching up towards 1.0950 on Friday following a strong recovery from a two-month low of 1.0900 reached on Thursday. This rebound may be temporary, as the US Dollar (USD) retains its strength ahead of the upcoming US Producer Price Index (PPI) data set for release at 12:30 GMT. The US Dollar Index (DXY), which gauges the Greenback against six major currencies, is holding steady near 103.00.

Market participants are closely monitoring the US PPI data, as it will shed light on the price changes of goods and services at the factory level in September. Producer inflation is primarily influenced by fluctuations in input costs and household demand.

Economists anticipate that annual headline PPI inflation will decelerate to 1.6% from 1.7% in August. In contrast, the annual core PPI, which excludes volatile food and energy prices, is expected to see a sharp increase to 2.7% from 2.4%. Monthly projections suggest that both headline and core PPI will grow at a slower pace of 0.1% and 0.2%, respectively.

The US Dollar remains buoyant as Atlanta Federal Reserve (Fed) Bank President Raphael Bostic has suggested the possibility of keeping interest rates unchanged at 4.75%-5.00% during the November meeting. Bostic's comments, made during an interview with the Wall Street Journal, indicated his openness to pausing rate cuts next month. He stated, “This choppiness to me is along the lines of maybe we should take a pause in November, and I'm definitely open to that,” following the release of the US Consumer Price Index (CPI) report, which showed inflation pressures rising faster than expected in September.

Daily Market Movers: EUR/USD Gains Slightly as Euro Strengthens

• EUR/USD continues its slight ascent towards 1.0950 during Friday’s European session, buoyed by the Euro’s strong performance against its major peers despite firm expectations for the European Central Bank (ECB) to implement further interest rate cuts in the remaining two policy meetings this year.
• The ECB has already cut its Deposit Facility Rate by 50 basis points (bps) to 3.5% this year and is expected to lower rates by another 50 bps, with traders anticipating two cuts of 25 bps each—one next week and the other in December.
• Dovish expectations for the ECB have been fueled by a quicker-than-anticipated decline in Eurozone inflation and increasing concerns about economic growth. This week, ECB policymaker and Governor of the Greek Central Bank, Yannis Stournaras, stated that price pressures are diminishing more rapidly than the ECB projected in September and supported two additional rate cuts in the remaining meetings this year, highlighting the necessity for further reductions in 2025.
• In addition, revised estimates for the German Harmonized Index of Consumer Prices (HICP) for September indicated that price pressures remain below the ECB's target of 2%, coming in at 1.8%, as shown in flash estimates.
• On the economic front, the growth outlook for the Eurozone appears fragile, particularly as Germany, its largest economy, is expected to close the year with a 0.2% decline in output, according to the German economic ministry.

Technical Analysis: EUR/USD Finds Support Near 200-Day EMA

EUR/USD has located temporary support near the 200-day Exponential Moving Average (EMA) at around 1.0900. The near-term outlook for the pair remains uncertain, with the 20- and 50-day EMAs approaching a bearish crossover near 1.1020.

The currency pair has weakened after breaking down from a Double Top chart pattern on the daily timeframe, triggered by a drop below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) is currently within the bearish range of 20.00-40.00, indicating potential further weakness.

If EUR/USD decisively breaks below the 200-day EMA around 1.0900, it may find support near the significant round number of 1.0800. Conversely, resistance is expected at the September 11 low of 1.1000 and the 20-day EMA at 1.1090.