EUR/USD sticks to modest gains above 1.18 after Fed's Harker's remarks

Despite a fluctuation witnessed in the NA session, the EUR/USD pair is preserving its daily earnings above the 1.18 handle. As of writing, the pair was trading at 1.1812, up 0.2%, or 25 pips, on the day.

Today's data from the U.S. came in mixed with the core PCE price index, the Fed's favorite inflation gauge, easing to its lowest level in nearly two years at 1.3% on a yearly basis in August, and personal income and spending meeting market estimates at 0.1% and 0.2% on a monthly basis respectively. The initial reaction pushed the US Dollar Index to 92.80 before the index recovered a part of its losses after the Chicago PMI advanced to a fresh 3-year high at 65.2 in September from 58.9 in August. At the moment, was at 92.97, virtually unchanged on the day.

Later in the session, Philadelphia Fed President Patrick Harker explained that they were starting to see some upward pressure on wage inflation and further added that he was in favor of another rate hike in December and three more rate hikes in 2018. However, he also mentioned that low inflation would create risks for the monetary policy, not allowing the DXY to react positively. 

• Fed's Harker: Still pencils in a rate hike in December, three rate hikes for next year

With today's modest rise, the pair is looking to close the second day in a row with earnings. Nevertheless, on a weekly basis, the pair is down nearly 100 pips as the heightened expectations of a 25 bps rate hike in December continues to drive the price action. According to the CME Group FedWatch Tool, the probability of a hike is now at 76.4%.

Technical outlook

Despite the recovery seen in the last two-days, the RSI indicator on the daily graph remains below the 50 mark, suggesting that the pair is not out of the woods yet. 1.1715 (Sep. 27 low) is a critical support ahead of 1.1640 (100-DMA) and 1.1500 (psychological level). On the upside, resistances align at 1.1860 (Sep. 26 high), 1.1915 (20-DMA) and 1.2000 (psychological level). 

• EUR/USD neutral near term, potential test of 1.1660 – UOB

Today's data from the U.S.

• US: Personal income increased $28.6 billion (0.2%) in August
• ISM: September Chicago Business Barometer rises sharply to 65.2
• UoM: Consumer sentiment remained largely unchanged