EUR/USD rebounds on Thursday after midweek pullback

• EUR/USD recovered ground on Thursday, sticking close to near-term highs.
• Despite recovery, Fiber remains on the south side of 1.1200.
• US PCE inflation to be the week’s key data print.

EUR/USD tuned back into the high end on Thursday, getting bolstered by a broad-market selloff in the Greenback. US data that printed better than expected helped to ease concerns of a possible economic slowdown within the US economy looming over the horizon.

The US economy still isn’t out of the woods yet, with key activity data still easing, but the hard edge of recession fears has been filed off. Friday still has one final hurdle for data-hounds to lurch over, however. US Personal Consumption Expenditure (PCE) inflation figures due during the last trading session of the week could throw a spanner in the works if they come out wildly out-of-tune with forecasts.

Across the Atlantic, pan-EU confidence indicators are also expected on Friday, but most of these indexed surveys are expected to stick close to previous figures. EUR traders will be much more interested in European Harmonized Index of Consumer Prices (HICP) inflation numbers for September, which are due next Tuesday. 

The Federal Reserve's recent decision to cut interest rates by 50 basis points raised apprehensions in global markets, with some investors fearing that the drastic move was a response to an impending economic downturn in the US. However, Fed Chair Jerome Powell clarified that the rate cut was a proactive measure aimed at supporting the US labor market, rather than a reactive response to recessionary signals.

Positive data on US Durable Goods Orders and weekly Initial Jobless Claims further reinforced the Fed's position, with both indicators surpassing expectations. The narrative of a "soft landing" for the economy remained intact. The upcoming release of the Personal Consumption Expenditure (PCE) inflation data on Friday will serve as a crucial litmus test for evaluating the impact of the recent rate cut by the Fed.

In August, US Durable Goods Orders stagnated at 0.0% month-on-month, falling short of the previous month's significant growth but still outperforming the projected contraction of 2.6%. Additionally, the Initial Jobless Claims for the week ending September 20 showed a decrease to 218K, beating the anticipated 225K and signaling a decline from the revised figure of 222K in the preceding week.

EUR/USD price forecast

Despite Thursday’s bullish bounceback, Fiber remains capped below the 1.1200 handle. Bidders are struggling to muscle EUR/USD back into the high end, but a lack of meaningful momentum in the hands of sellers is limiting options for a downside swing.

The pair remains well-bid on the north side of the 50-day Exponential Moving Average (EMA) near 1.1040, while price action still has plenty of room to move into the top end and reclaim chart paper above 1.1200.

EUR/USD daily chart