The EUR/USD extended its gains for the second session in a row, reaching the 1.1030 level during Asian trading on Monday. The pair’s rise could be due to the increased likelihood of an interest rate cut by the Federal Reserve in September.

Last week, U.S. economic data revealed that retail sales beat estimates, while the Producer Price Index (PPI) and Consumer Price Index (CPI) indicated that inflation is on a downward trajectory. Additionally, U.S. housing starts fell by nearly 6.8% in July to 1.238 million units, following a 1.1% increase in June, marking the lowest level since 2020. This decline has heightened fears about the resilience of the economy, particularly in light of recent reports indicating easing inflation and labor conditions.

Federal Reserve Bank of San Francisco President Mary Daly remarked on Sunday that the central bank should adopt a gradual approach if borrowing costs are to be reduced, according to the Financial Times. Daly expressed her disagreement with economists’ concerns that the U.S. economy is nearing a sharp slowdown that would justify rapid interest rate cuts.

Similarly, Chicago Fed Board of Governors President Austan Goolsbee stated that central bankers should be cautious about maintaining a tightening-based policy for longer than previously anticipated. Although it is unclear whether the Fed will cut interest rates next month, failing to do so could harm the labor market, according to CNBC.

In Europe, investors expect the European Central Bank to gradually cut interest rates. However, monetary policymakers have been hesitant to commit to a new path of rate cuts due to concerns that price pressures could reaccelerate.

EUR/USD Daily Technical Analysis for August 19th:

The pair is currently trading above the psychological resistance at 1.1000, which will serve as support for bullish control in the broader trend. Consequently, if gains extend to the 1.1060 and 1.1120 levels, technical indicators may move into strong overbought territory. Above those levels, selling may be advisable. On the other hand, according to the daily chart, the 1.0820 support level will remain the most relevant for ending the uptrend.