EUR/USD Forecast: Mixed signs before key data
|- US Dollar Index declines ahead of crucial US Consumer Price Index data.
- Eurostat will release employment and growth data on Tuesday.
- The EUR/USD rises for the second consecutive day, holding above 1.0650.
The EUR/USD rose on Monday, finding support around the 1.0560 area, driven by a weaker US Dollar and a decline in US yields. Market focus now shifts to upcoming economic data releases from both the US and the Euro area.
During a relatively quiet day, the US Dollar weakened during the American session as US yields pulled back and risk appetite increased. The rise in equity prices on Wall Street and commodity prices contributed to this sentiment. The key focus is on the US Consumer Price Index (CPI) report scheduled for release on Tuesday, which is expected to have significant implications for the market.
If US inflation accelerates, it could raise the likelihood of another interest rate hike by the Federal Reserve, leading to higher yields and a stronger US Dollar. Conversely, a softer inflation reading could have the opposite effect, potentially boosting the EUR/USD pair.
Eurostat will release employment and growth data from the third quarter. The economy is expected to have contracted by 0.1%. Additionally, the ZEW survey results are also due.
EUR/USD short-term technical outlook
The EUR/USD has risen for the second consecutive day and is holding above the 20-day and 55-day Simple Moving Averages (SMA). Technical indicators on the daily chart suggest a modest bullish bias. However, a daily close below 1.0615, would negate the positive outlook.
On the 4-hour chart, the pair is testing a short-term downward trendline around 1.0705, while staying above the support area at 1.0655. Technical indicators do not provide clear signals. A break above 1.0710 would open the door for further strength, with the next targets at 1.0735 and then the previous high near 1.0760. On the downside, a bearish acceleration is likely if the pair breaks below 1.0650, initially targeting 1.0635 and then 1.0610.
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