EUR/USD Rebounds as Dollar Weakens Ahead of US CPI Data

EUR/USD ended its losing streak for the last three days and traded around 1.1050 during Wednesday’s Asian session. This rebound is attributed to a weakening US Dollar (USD) ahead of the US Consumer Price Index (CPI) data, due to be released later in North American trading hours. The CPI report could provide new insights into the potential scale of the Federal Reserve's (Fed) interest rate cut this September. The US Dollar is facing headwinds as US Treasury yields continue to decline. The US Dollar Index (DXY), which gauges the USD's strength against six major currencies, paused its three-day winning streak, trading around 101.40. At the time of writing, the 2-year and 10-year US Treasury yields are at 3.57% and 3.62%, respectively. Last week’s labor market report increased uncertainty regarding the likelihood of a substantial rate cut by the Fed. According to the CME FedWatch Tool, markets are expecting at least a 25 basis point (bps) rate cut in September, though the probability of a 50 bps cut has slightly decreased to 31.0%, down from 38.0% the previous week. In contrast, the Euro has faced downward pressure following recent German inflation data. The Harmonized Index of Consumer Prices (HICP) reflected a 2.0% increase compared to the same period last year in August, aligning with expectations, while the monthly index fell by 0.2%, also in line with forecasts. Similarly, the Consumer Price Index (CPI) remained steady at 1.9% compared to the same month last year for August. Looking ahead, traders expect the European Central Bank (ECB) to lower interest rates to 4.0% by implementing a 25 basis point cut at its policy meeting on Thursday.

In the pair, the first support level is at 1.1015. If this level is breached, the next supports to watch will be 1.1000 and 1.0950. On the upside, the first resistance is at 1.1060; if this level is surpassed, the next targets will be 1.1100 and 1.1150.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1150	1.1100	1.1060	1.1015	1.1000	1.0950