EUR/USD Forecast: Bulls on pause, still in control

EUR/USD Current Price: 1.0848

• European Central Bank President Lagarde said policymakers need to be alert to risks.
• Speculative interest keeps beating against US Federal Reserve officials’ words.
• EUR/USD grinds north in an optimistic environment, could soon resume its advance.  

The EUR/USD pair trades in the 1.0850 price zone, little changed on a daily basis and confined to familiar levels. The US Dollar recovered just modestly these days after last week´s collapse, as investors remain confident the Federal Reserve (Fed) will refrain from hiking rates further but, on the contrary, soon engage in a new rate-cut cycle. Bets in such a direction have been increasing since the Fed’s September meeting and accelerated in November, and may be undue.

Chairman Jerome Powell and other Federal Open Market Committee (FOMC) members have warned speculative interest of excessive bets against additional hikes, but market participants did not listen. Furthermore, the latest inflation-related figures kept fueling such speculation, as the United States released the Producer Price Index (PPI) on Wednesday, showing wholesale prices were down 0.5% MoM in October, increasing by just 1.3% from a year earlier.

Financial markets turned optimistic and dropped the safe-haven US Dollar, pushing EUR/USD closer to 1.0900, a multi-month high. However, it is worth noting that other United States (US) data suggests the local economy is in a much better shape than its counterparts, and at some point, that should strengthen the Greenback. Anyway, it may be too early to think about that.

Before Wall Street´s opening, European Central Bank (ECB) President Christine Lagarde delivered pre-recorded opening remarks at the Annual European Systemic Risk Board Online Conference. Lagarde said that Europe’s financial system has avoided the worst-case scenario of severe systemic risks materialising at the same time, adding policymakers need to remain proactive and alert to financial stability risks as and when they arise.

The US will release Initial Jobless Claims for the week ended November 10, October Import and Export Prices, and Industrial Production for the same month. The local macroeconomic calendar also includes the November Philadelphia Fed Manufacturing Survey.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it posted a lower low, although it quickly bounced to turn green. At the same time, the pair keeps developing above all its moving averages, with the 100 and 200 Simple Moving Averages (SMAs) directionless in the 1.0790/1.0800 price zone and the 20 SMA accelerating north far below the longer ones. In the meantime, technical indicators have stabilized near overbought readings, turning marginally higher but lacking clear directional strength.

The near-term technical picture favors another leg north. The 4-hour chart shows that technical indicators corrected extreme overbought readings and aim to recover, reflecting increasing buying interest. At the same time, the 20 SMA heads north almost vertically below the current level, while far above also bullish longer ones. The bullish momentum will likely resume on a run past 1.0890, the immediate resistance level.

Support levels: 1.0840 1.0800 1.0755  

Resistance levels: 1.0890 1.0925 1.0960

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