- An unexpectedly softer US inflation reading weighed on the dollar.
- The euro hovered just below a more than two-month high achieved on Tuesday.
- Data confirmed a slight contraction in the Eurozone economy in the third quarter.
The EUR/USD forecast is bullish as the dollar struggles significantly lower. This struggle comes after an overnight decline triggered by an unexpectedly softer US inflation reading. The report reinforced the belief that the Federal Reserve has completed its monetary tightening cycle. The dollar’s slump led to a surge in many peer currencies, and the euro hovered just below a more than two-month high achieved on Tuesday.
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Data showed that US consumer prices remained unchanged in October. Moreover, the annual increase in underlying inflation was the smallest in two years. Over the 12 months through October, the Consumer Price Index (CPI) rose by 3.2%, falling below economists’ projections. Consequently, market participants nearly ruled out the possibility of another rate hike at the Fed’s December monetary policy meeting. Meanwhile, expectations of a rate cut in May next year rose to approximately 50%.
The dollar plummeted by 1.5% overnight against major currencies. Additionally, US Treasury yields, which had previously contributed to the dollar’s strength, experienced a significant decline.
Meanwhile, a new estimate on Tuesday confirmed a slight contraction in the Eurozone economy in the third quarter. As a result, there are concerns about a potential technical recession if the fourth quarter follows a similarly weak trend. However, there was a positive note as employment levels still experienced an increase.
EUR/USD key events today
Key events from the US today will include reports on,
- Core retail sales
- The producer price index
- Retail sales
EUR/USD technical forecast: Bullish trend surges well past 1.0751.
The bullish bias for EUR/USD is strong as it finally broke above the 1.0751 resistance level to make a new high. The price had traded in a sideways move below 1.0751 for some time before going above. Moreover, it has rallied and is approaching the 1.0900 key resistance level.
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However, the price is overbought, as seen in the RSI, which trades above 70. It might allow bears to resurface for a pullback. At the same time, the price is trading too far above the 30-SMA, and it might need to pull back before continuing higher. Still, bulls will likely soon take out the 1.0900 key level.
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