EUR/USD Forecast: Trading Near Its Year High And Is Set To Keep On Rallying

EUR/USD Current Price: 1.1934

• Fed’s Clarida dismissed once again negative rates and higher rates on falling unemployment.
• German inflation contracted in August, according to preliminary estimates.
• EUR/USD is trading near its year high and is set to keep on rallying.

The American dollar remained on the backfoot this Monday, edging lower against most major rivals after a failed attempt to recover some ground. The EUR/USD pair surged to test its year high at 1.1965, to settle a handful of pips below the level. The market’s mood was mixed, as market players started the day with a positive sentiment, backed by upbeat Chinese data. Still, equities traded mixed throughout the sessions.

In the data front, Germany published August inflation data, which was worse than anticipated.  The annual reading came in at -0.1%, while the monthly CPI printed at -0.2%. The US, on the other hand, released the Dallas Fed Manufacturing Business Index for August, which bounced from -3 in July to 8. Also, Fed’s Vice Chair Richard Clarida offered a speech, reiterating that negative interest rates are not in the table and that the central bank will not raise interest rates just because the unemployment rate is falling.

This Tuesday, Markit will publish the final versions of August Manufacturing PMIs for all major economies, while the EU will unveil its preliminary estimate of August inflation. The US will unveil the official ISM Manufacturing PMI, foreseen at 54.5 from 54.2 in the previous month.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair is trading firmly above the 1.1900 level as the US session comes to an end, poised to extend its advance amid the persistent dollar’s weakness. The 4-hour chart shows that the pair has continued to advance beyond its moving averages, with the 20 SMA accelerating north above the 100 SMA, reflecting the strong buying interest. Technical indicators, in the meantime, have partially lost their bullish strength near overbought readings, but are far from indicating exhaustion.

Support levels:  1.1905 1.1870 1.1825  

Resistance levels: 1.1965 1.2010 1.2050

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