EUR/USD Price Forecast: Euro Shaped by US Factors

EUR/USD ANALYSIS

• US CPI under the spotlight.
• Central bank speakers to follow US inflation.
• EUR/USD eyes 1.1096 yearly swing high.

EURO FUNDAMENTAL BACKDROP

The euro is looking to finish on its fifth consecutive positive day against the US dollar this Wednesday after pushing above the 1.1000 psychological handle. Despite yesterday’s weaker ZEW economic sentiment index data, higher German inflation supplemented the bullish bias.

Today’s focus will be firmly on the US CPI report (see economic calendar below) with estimates significantly lower on both headline and core metrics. Should actual figures come in line with forecasts, the Fed hiking cycle may be nearing its peak after one more potential 25bps hike. Following the inflation release will be a host of Fed speakers that will react to the data and possibly revise their existing hawkish bias to one less aggressive.

From a EUR perspective, there is no economic data scheduled but the ECB’s Lane and Vujcic are expected to speak. I do not anticipate any change in their stance to continued monetary policy tightening which may augment euro support.

EUR/USD ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

Chart prepared by Warren Venketas, IG

Daily EUR/USD price action remains within the upward trending channel but firmly within the bullish zone as prices stay firmly above both the shorter term 50-day moving average (yellow) and the long-term 200-day moving average (blue). The Relative Strength Index (RSI) although slightly below overbought levels has room for further upside exposing the 1.1096 swing high.

Resistance levels:

• 1.1096

Support levels:

• 1.1000
• Channel support (dashed black line)

IG CLIENT SENTIMENT DATA: MIXED

IGCS shows retail traders are currently SHORT on EUR/USD, with 69% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning we arrive at a short-term cautious bias.

Contact and followWarrenon Twitter:@WVenketas