The EUR/USD currency pair is staging a strong comeback on Thursday after dipping below the critical 1.0800 support level earlier in the session. This recovery coincides with a correction in the US Dollar.

Market Dynamics:

• US Dollar Retreat: The US Dollar Index (DXY) is pulling back after reaching a two-week high, easing some pressure on the Euro.
• Fed Rate Cut Expectations: Despite the pullback, market sentiment towards the US Dollar remains cautious due to lingering doubts about potential Fed rate cuts in the near future.
• Focus Shifts to US Inflation Data: Investor attention has shifted towards the release of core PCE inflation data for the US on Friday. This data will significantly influence speculation about possible Fed rate cuts in September.

Technical Analysis (EUR/USD):

• Symmetrical Triangle Breakout Retest: The EUR/USD pair is attempting to recover after finding buying interest near the support level following a breakout from a symmetrical triangle chart pattern.
• Moving Averages and RSI: The pair’s struggle to stay above short-term and long-term EMAs indicates an uncertain near-term outlook. The RSI hovering around 40-60 suggests a loss of upside momentum.

Support and Resistance:

• Upside Potential: Regaining the two-month high near 1.0900 could signal a potential strengthening of the Euro. A decisive break above this level could lead to further gains towards 1.0950 and 1.1000.
• Downside Risk: A fall below the 200-day EMA at 1.0800 could trigger further losses for the Euro.

Overall:

The EUR/USD pair’s recovery reflects a correction in the US Dollar and a cautious market stance. The upcoming US inflation data will be crucial in determining the future direction of the Euro. If the data suggests a slowdown in inflation, it could bolster expectations of Fed rate cuts later this year, potentially strengthening the Euro. Conversely, higher-than-expected inflation figures could reignite concerns about continued Fed tightening, putting downward pressure on the Euro.