EUR/USD trims losses with the US Dollar firm on cautious Fedspeak

• The Euro languishes near 1.1730 lows following a 0.6% reversal on Wednesday.
• Weak Eurozone data and a cautious Fed rhetoric sent the Euro tumbling on Wednesday.
• The final reading of US Q2 GDP and more Fed speakers are set to move markets during the day.

EUR/USD is trading near the 1.1740 area at the moment of writing on Thursday, after retreating from weekly highs above 1.1800 the previous day. Federal Reserve (Fed) speakers have provided some support to the US Dollar (USD), showing a cautious tone on further interest rate cuts, while in Europe, recent macroeconomic figures have failed to cheer investors.

San Francisco Fed President Mary Daly showed openness to ease monetary policy, but she also highlighted the need to balance both central bank goals, employment and inflation, which casts some doubt on the timing of the next rate cut.

These comments align with the principles of Fed Chairman Jerome Powell's speech on Tuesday. He showed concern about inflation and affirmed that the bank will proceed slowly with interest rate cuts, contradicting the steep monetary easing cycle foreseen by the market's consensus.

In Europe, recent economic data have not been particularly supportive. The German IFO Business Climate Index deteriorated against expectations, and the preliminary PMIs showed mixed figures. The focus on Thursday will be on the final reading of US Q2 Gross Domestic Product (GDP) and several speeches by some Fed officials, although the highlight of the week is Friday's US Personal Consumption Expenditures (PCE) Price Index data, the Fed's favorite inflation gauge.

Daily digest market movers: Cautious Fed rhetoric underpins the US Dollar's recovery

• The US Dollar holds gains as Fed officials put investors' hopes of back-to-back rate cuts into question. Fed's Daly suggested on Wednesday that further monetary easing might have to wait until next year, in contrast with the dovish projections released after last week's monetary policy meeting, which has provided some support to the Greenback.
• On the macroeconomic front, Eurozone data released on Wednesday revealed that the German Business Climate Index fell to 87.7 in September from 89.0 in August, against market expectations of an improvement to 89.3. Investors' assessment of the current economic conditions also deteriorated, to 85.67 from 86.4, while the economic expectations gauge dropped to 89.7 from 91.6 in the previous month.
• Later this Thursday, the US GDP is expected to confirm that the economy grew at a 3.3% annualized rate in the second quarter, following a 0.5% contraction in the first three months of the year.
• At the same time, weekly US Initial Jobless Claims will gather some interest and are expected to have risen again, to 235K from 231K in the previous week. Considering the weak momentum of the labor market, a larger-than-expected rise might hurt the US Dollar's recovery.
• Apart from that, some more Fed speakers will hit the wires. Kansas Fed President Jeffrey Schmid and New York Fed President John Williams are expected to speak at 13:00 GMT. Later on, Dallas Fed President Lorie Logan, San Francisco Fed President Mary Daly, Fed Vice Chair for Supervision Michelle Bowman, and Fed Governor Michael Barr will also appear in public.

Technical Analysis: EUR/USD has breached trendline support at 1.1750

EUR/USD came under strong bearish pressure on Wednesday and reversed the previous two days' gains to breach the trendline support from September 2 lows, now around 1.1750. Momentum indicators on the 4-hour chart are well into negative territory, and Tuesday's lower high strengthens the case for a trend shift.

Immediate support is now at the 1.1730 area (September 22 lows). Further down, the September 12 low, near 1.1700, and the September 11 low, at 1.1660, will come into focus. To the upside, the reverse trendline is acting now as resistance at the 1.1750 area. Above here, the targets are the September 23 high and the September 18 high, near 1.1850.