Market's mood improved during the Asian session, as generally positive data boosted local markets, which led to a strong opening in European stocks. The EUR/USD pair extended its advance up to 1.1494, but shed over 60 pips following ECB's Nowotny words on QE. The government council member said that the Central Bank is clearly missing its inflation target and therefore, "additional sets of instruments are necessary" according to his words.
The comments came ahead of the ECB meeting next Thursday, and investors speculate that there is a good chance further QE will be announced. Later today, the US will release its inflation figures for September, expected to fell by 0.1% in the month, and 0.2% compared to an year before. At the same time, the country will release its weekly unemployment claims and the New York Empire State Manufacturing index, all of which will likely set the tone for the rest of the day.
View the Live chart of the EUR/USD
The EUR/USD fell down to 1.1426 a fresh daily low, from where its currently bouncing, but still holding below the 1.1460 region, the immediate resistance area. The 4 hours chart shows that the 20 SMA maintains a strong bullish slope around 1.1400, while the technical indicators have turned south in extreme overbought territory, and suggest the downward corrective movement may not be over.
Nevertheless, and with the dollar weakening across the board, the downside seems limited, particularly if the price manages to retake the 1.1460 level. In that case, the recovery can extend back to the highs around 1.1500, with large stops suspected above it, meaning that if broken, should lead to a stronger rally up to 1.1550.
A break below the 1.1400 level is required to confirm a downward corrective move towards the 1.1360 price zone, whilst below this last, 1.1320 is the next probable bearish target.
Latest updates on the EUR/USD Forecast
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