EURUSD Rebounds on Higher EU Inflation and Weaker US Payrolls Ahead of FOMC Decision

EURUSD rebounded on Wednesday after repeatedly testing the 1.0800 support zone (50% retracement of the 1.0666/1.0948 rally / daily Kijun-sen), indicating the formation of a bear trap.

The fresh gains were driven by higher-than-expected EU inflation numbers for July, which bolstered sentiment for the Euro, and below-expectations US ADP private sector payrolls, signaling a softening US labor market and reinforcing the narrative of potential Fed rate cuts.

Attention now shifts to the key event of the day – the FOMC rate decision. The US central bank is expected to hold rates steady in the July policy meeting, but Chair Powell’s press conference may provide further insight into future actions.

The Fed is widely anticipated to begin cutting interest rates in September, with more signals from the central bank likely to weaken the dollar and further support the Euro.

The technical outlook on the daily chart is mixed, with conflicting moving averages, negative momentum, and a rising RSI, creating an unclear technical signal. However, the recent gains suggest a potential reversal signal on the daily chart.

For this scenario to be confirmed, EURUSD needs to rise and close above the 1.0850 zone (falling 10DMA / 38.2% Fibo retracement of the 1.0948/1.0798 decline), which would validate a bullish signal and target upper pivots around the 1.0870 zone (lower platform / 50% retracement).

A sustained break below the 1.0800 pivot, however, would negate the fresh bullish momentum and signal the continuation of the larger downtrend from the July 17 top at 1.0948.

Res: 1.0850; 1.0870; 1.0890; 1.0902
Sup: 1.0807; 1.0800; 1.0773; 1.0732