EUR falls following Jerome Powell’s cautious comments

The EURUSD rate declines on Tuesday, 16 July 2024, as investors evaluate comments from Federal Reserve Chair Jerome Powell.

EURUSD trading key points

• Markets estimate the likelihood of a Federal Reserve key rate cut at 94.4%
• Today, investors are awaiting US June retail sales data
• EURUSD price targets: 1.0800 and 1.0950

Fundamental analysis

The US dollar rose from five-week lows on Tuesday as investors weighed arguments in favour of a September interest rate cut following comments from Federal Reserve Chair Jerome Powell.

The central bank’s chief stated that additional data was needed to confirm a sustainable decline in inflation before deciding on an interest rate reduction. This statement followed last week’s data release, which showed that consumer price inflation was easing but still above the target level. Powell expressed confidence that inflation would eventually return to 2% but did not hint at the timing of a potential rate cut.

Investors are almost certain that the Federal Reserve will lower the key rate in September, estimating the likelihood at 94.4%. Monday’s speech by the president of the Federal Reserve Bank of Chicago Austan Goolsbee further heightened expectations as he noted that a rate reduction may soon be warranted.

Today, investors will closely watch US retail sales data, which are expected to decrease slightly by 0.3% month-over-month in June.

EURUSD technical analysis

On the EURUSD H4 chart, a consolidation range continues to develop around 1.0880, extending to 1.0920. Today, 16 July 2024, the market is forming a decline structure towards 1.0880. The price is expected to breach this level and extend the range to 1.0840, representing the first target for correction. A corrective wave could practically form, with the main target at 1.0800. After the correction, another growth structure might follow, aiming for 1.0950, marking the completion of growth potential.

Summary

Investors are awaiting the release of US retail sales data. A drop in the indicator may signal lower consumer activity and directly affect the Federal Reserve’s interest rate decisions. Technical indicators suggest a further correction to the 1.0800 target. A growth wave could start once the price reaches this target, aiming for 1.0950.