After closing the first three days of the week in negative territory, EUR/USD gathered bullish momentum on Thursday and registered strong gains. The pair continues to edge higher toward 1.1100 in the European morning on Friday.
The European Central Bank (ECB) lowered the benchmark interest rate, the deposit facility, by 25 basis points (bps) to 3.5% as expected. The ECB also lowered interest rates on the marginal lending facility and the main refinancing operations by 60 bps. "The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction," the ECB noted in the policy statement. In the post-meeting press conference, ECB President Christine Lagarde refrained from hinting at the timing of the next rate cut.
Although the ECB event failed to provide a boost to the Euro, the renewed selling pressure surrounding the US Dollar (USD) helped EUR/USD turn north.
On a yearly basis, the Producer Price Index (PPI) rose 1.7% in August in the US, down from 2.1% in July and below the market expectation of 1.8%. The probability of a 50 bps Federal Reserve (Fed) rate cut in September climbed above 40% after this data, per CME FedWatch Tool, and triggered a USD selloff.
The US economic calendar will feature the University of Michigan's Consumer Sentiment Survey for September, which is unlikely to influence the USD's valuation.
The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 60 and EUR/USD rose slightly above the 100-period Simple Moving Average (SMA), reflecting a buildup of bullish momentum. In case the pair clears 1.1090-1.1100 resistance area (100-period SMA, Fibonacci 23.6% retracement of the latest uptrend), it could target 1.1160 (static level) and 1.1200 (end-point of the uptrend) next.
On the downside, 1.1060 (50-period SMA) aligns as first support before 1.1040 (Fibonacci 38.2% retracement) and 1.1020 (200-period SMA).
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