EUR/USD preserves daily gains near 1.19 as DXY struggles to recover

The EUR/USD pair, which plummeted to its lowest level of the week at 1.1823 in the European session, gathered momentum in the second half of the day and retraced its daily losses. As of writing, the pair was trading at 1.19, up 0.15% on the day.

Although today's data from the euro area revealed that the core CPI remained unchanged at 1.3% on a yearly basis in August, beating the market estimate of 1.2%, the shared currency lost strength against its peers. A recent article by Reuters seemed to be behind that price action. Citing three sources familiar with the matter, Reuters claimed that rapid gains by the euro against the dollar were worrying a growing number of policymakers at the ECB.

• ECB policy makers are worried about euro's strength - Scotiabank

However, the pair reversed course later in the day after the data from the U.S. showed that the core PCE price index, the preferred inflation measure of the Federal Reserve, came in at 1.4% on a yearly basis in August, moving further away from the 2% target rate and dampening the expectations of another rate hike in 2017. Weighed by the disappointing figures, the US Dollar Index quickly plummeted below the 93 handle and refreshed its daily low at 92.60. At the moment, the index is at 92.65, losing 0.2% on the day.

• US Dollar consolidates losses, remains below 93

Ahead of tomorrow's employment report from the U.S., the pair is likely to stay in a consolidation phase. The unemployment rate is expected to remain steady 4.3% while the nonfarm payroll growth is seen easing to 180K in August from 209K in August. However, the market could react to the average hourly earnings data as well. A higher-than-expected reading could be seen as a factor that would lift the wage inflation and increase the odds of a rate hike in December and provide a boost to the greenback.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "in the 4 hours chart, the price remains below a bearish 20 SMA, currently around 1.1945, while the Momentum indicator keeps heading south near oversold readings, as the RSI indicator consolidates around 45. Below the daily low, the pair has a stronger support in the 1.1780/90 region that if it's broken, would result in a steeper decline down towards the 1.1700 level, where the pair has a daily ascendant trend line coming from early April low of 1.0603. To the upside, the level to watch is 1.1920, as an upward extension beyond it should result in a bullish extension that can extend up to 1.2000."

According to the analyst, supports for the pair could be seen at 1.1820, 1.1785 and 1.1740 while resistances align at 1.1920, 1.1965 and 1.2000.

• EUR strength should continue - Westpac

Today's data from the U.S.

• US: Personal income increased $65.6 billion (0.4%) in July
• US: Weekly initial claims was 236,000, an increase of 1,000 from previous week
• US-based employers announced plans to cut payrolls by 33,825 in August
• US: Pending home sales lessen 0.8% in July
• US: August Chicago Business Barometer stayed unchanged at 58.9