EUR/USD rises above 1.0740 area amid USD weakness

• EUR/USD rose to a four-day high of 1.0755.
• ECB’s tightening expectations remain steady ahead of Thursday’s ECB decision.
• Eyes are set on Wednesday’s CPI figures from August from the US. 

At the start of the week, the EUR/USD soared towards the 1.0755 area, seeing more than 0.50% gains and then settled near 1.0745. On the one hand, the USD is retreating and trades with losses against most of its rivals while investors are gearing up for Wednesday's Consumer Price Index (CPI) figures from August. On the Euro’s side, investors await Thursday’s European Central Bank (ECB) decisions, where markets discount low odds of a hike.

Recent data from the US showed a mixed labour market outlook with accelerating job creation but wage inflation declining. In contrast, economic activity has shown weakness in the manufacturing sector but a strength in the services area. In addition, despite investors already warranting a pause in next week's Federal Reserve (Fed) meeting, inflation figures from August will be crucial for investors to continue modelling their expectations. The headline CPI is expected to have increased by 0.2% MoM while the Core measure by 0.5%, and hot inflation reading may boost hawkish bets for the November and December meetings.

On the other hand, the Euro is trading soft against most of its rivals ahead of Thursday’s ECB decisions. According to a Bloomberg report, a slight majority of 55 analysts polled are seeing a pause, with 25 seeing a 25 basis point hike. Looking ahead, the chances of a 25 bps increase stand at 60% in the October meeting, followed by a 70% likelihood of a similar increase in December. Investors will closely watch Christine Lagarde’s tone on Thursday and the bank’s statement to look for clues on the next decisions.

EUR/USD Levels to watch 

 Based on the daily chart, EUR/USD maintains a neutral to bearish technical perspective, suggesting that despite the bulls gaining momentum, the bears are in control. The Relative Strength Index (RSI) holds a positive slope deep in negative territory, while the Moving Average Convergence (MACD) presents stagnant red bars. Moreover, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), indicating that the bears are still in command of the broader picture.

Support levels: 1.0700, 1.0680, 1.0650.
Resistance levels: 1.0800, 1.0810-20 (200 and 20-day SMA convergence), 1.0850.

 EUR/USD Daily Chart