• Major events this week include the Fed policy meeting and NFP.

• The likelihood of a Fed cut this week is below 5%.

• ECB’s Schnabel said Eurozone service price growth remains a significant problem.

The EUR/USD outlook points south, with the dollar firming ahead of Wednesday’s Federal Reserve policy meeting. Meanwhile, ECB policymakers have created a mixed picture of the outlook for European Central Bank rate cuts.

Markets are preparing for several major events this week, including the Fed policy meeting and US nonfarm payrolls. Meanwhile, the Eurozone will release key inflation data shaping the outlook for ECB rate cuts. On Friday, data revealed that US inflation increased slightly, aligning with expectations. As a result, markets are still expecting the first cut in September. Meanwhile, the likelihood of a cut this week is below 5%.

At the Fed policy meeting, officials might highlight the progress in inflation towards the 2% target. However, there might be caution regarding the US economy’s resilience. The continued strength gives the Fed more room to wait for inflation to drop. Still, investors are confident policymakers will call for a rate cut in September.

Meanwhile, inflation is at 2.5% in the Eurozone, nearing the ECB’s 2% target. However, the central bank held rates in July due to high service inflation. On Friday, ECB’s Isabel Schnabel noted that the central bank has a challenging task ahead to lower inflation. According to her, service price growth remains a significant problem.

However, other policymakers are ready to cut in September. Meanwhile, ECB President Christine Lagarde said that September remains wide open, meaning anything could happen, depending on incoming data.

EUR/USD key events today

Neither the US nor the Eurozone will report high-impact economic data today. Therefore, the pair might consolidate.

EUR/USD technical outlook: Solid support at 1.0825

On the technical side, the EUR/USD decline has paused at the 1.0825 support level. Recently, the price was in a corrective move that retested the 30-SMA resistance. Since the SMA held firm, the price bounced lower with an impulsive candle. However, bears must break below 1.0825 to make a lower low and confirm a downtrend.

Notably, the RSI is showing weaker bearish momentum near 1.0825. If bears fail to break below, the trend might reverse, with the price breaking above the SMA. However, if bearish momentum increases, the downtrend will continue with the target of 1.0750.

https://www.forexcrunch.com/blog/2024/07/29/eur-usd-outlook-dollar-soars-in-wake-of-fomc-meeting/