The EURUSD pair is still increasing in value before the release of US CPI data.

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• EUR/USD continues to extend gains ahead of US CPI releases.

The pair currently trades last at 1.07511.

The previous day high was 1.0769 while the previous day low was 1.0705. The daily 38.2% Fib levels comes at 1.0745, expected to provide support. Similarly, the daily 61.8% fib level is at 1.073, expected to provide support.

EUR/USD extends gains for the fourth successive day, trading higher around 1.0760 during the Asian session on Wednesday. The pair is experiencing upward support since an unnamed source claimed that the European Central Bank (ECB) has internally raised its inflation forecasts ahead of the ECB’s policy meeting on Thursday.

According to Reuters, the source has indicated that the European Central Bank’s (ECB) quarterly projections, which are set to be presented to its Governing Council on Wednesday, will project inflation to be above 3% in 2024.

This projection contradicts expectations for a slight reduction in inflation. The updated 2024 projection exceeds the central bank’s 2% inflation target and surpasses the 3% forecast made in June. It also stands higher than the 2.7% figure seen in a Reuters poll of economists.

The source further mentioned that the rate decision for the ECB meeting was still a challenging matter, and formal proposals had not yet been put forth. However, the significant projection of inflation exceeding 3% in 2024 adds weight to the argument for a rate hike.

It appears to confirm concerns that bringing down inflation may be more challenging than previously anticipated. This projection underscores the potential need for the ECB to adopt measures to address rising inflationary pressures.

On the other side, the EUR/USD pair might encounter challenges stemming from market caution as traders await the release of inflation data from the United States (US), scheduled for later in the North American session. This data release can have a substantial impact on currency markets, potentially influencing the direction of the pair.

The US Consumer Price Index (CPI) is anticipated to show a 0.5% month-on-month increase, which represents an improvement from the previous month’s reading of 0.2%. Additionally, the Core CPI figure, which excludes the more volatile food and energy prices, is expected to remain stable at 0.2%.

These inflation figures provide critical insights into the state of price movements in the US economy and can have a substantial impact on market sentiment and the US Federal Reserve’s (Fed) policy decision. Investors have indeed been considering the likelihood of a 25 basis point (bps) interest rate hike by the US Federal Reserve (Fed) in either the November or December meetings.

Additionally, there’s an expectation that the Fed will maintain higher interest rates over an extended period. Inflation aberration could further strengthen the hawkish sentiment, potentially leading to a stronger US Dollar (USD) compared to the Euro (EUR) as the Fed may take measures to combat rising prices.

US Dollar Index (DXY), which assesses the performance of the US Dollar (USD) against a basket of the other major six currencies, struggling to snap the three-day losing streak. Spot price trades higher around 104.60 at the time of writing. Moreover, the Greenback is anticipated to remain resilient, supported by the further increase of economic activities in the US.

On Thursday, US Retail Sales growth data are projected to exhibit a slight slowdown. The expectations for August show a 0.2% increase compared to the previous month’s growth of 0.7%. These figures may offer insights into consumer spending patterns and can influence market sentiment.

Technical Levels: Supports and Resistances

EURUSD currently trading at 1.0758 at the time of writing. Pair opened at 1.0754 and is trading with a change of 0.04 % .

The pair remains strongly bearish on the daily time frame. It trades below the 20 SMA @ 1.0811, 50 SMA 1.0944, 100 SMA @ 1.0905 and 200 SMA @ 1.0826.

The previous day high was 1.0769 while the previous day low was 1.0705. The daily 38.2% Fib levels comes at 1.0745, expected to provide support. Similarly, the daily 61.8% fib level is at 1.073, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 1.0717, 1.0679, 1.0653
• Pivot resistance is noted at 1.078, 1.0806, 1.0844

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