EUR/USD Forecast: Buyers losing interest ahead of FOMC Minutes

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0602

United States Federal Reserve officials' comments keep leading the sentiment.
German annual Harmonized Index of Consumer Prices confirmed at 4.3% in September.
EUR/USD retains a mildly bullish stance in the near term, needs to run past 1.0650.

Financial markets stabilized on Wednesday, with the US Dollar giving up fear-inspired gains on the back of dovish comments from US Federal Reserve (Fed) officials. The EUR/USD pair consolidates around the 1.0600 figure, not far below a fresh weekly high of 1.0628.

The USD strengthened at the beginning of the week following the declaration of war between Israel and the Palestinian Hamas group. The American currency found additional support in comments from different Fed officials, who suggested that higher government bond yields somehow offset the need to tighten further. The odds for one more rate hike before year-end in the United States (US) fell, damaging demand for the USD to benefit high-yielding assets.

However, Federal Reserve Governor Michelle Bowman said on Wednesday that despite some progress on inflation, the central bank will probably need to tighten monetary policy further to restore price stability.

Across the pond, European Central Bank (ECB) Governing Council member Klaas Knot noted that financial stability is a crucial condition for price stability, adding that restrictive policies will be needed for some time and that European policymakers are ready to adjust rates further if disinflation stalls.

A scarce macroeconomic calendar and a holiday in the US and Canada on Monday maintain major pairs within limited intraday ranges, although some interesting figures started coming out during European hours. Germany published the final estimate of the September Harmonized Index of Consumer Prices (HICP), which was confirmed at 4.3% YoY. The US unveiled the September Producer Price Index (PPI), showing wholesale price pressures were up by 0.5% MoM and 2.2% YoY, higher than expected. The core annual figure was up to 2.7% from 2.2% in the previous month.

Speculative interest will now wait for the September meeting's US Federal Open Market Committee (FOMC) Minutes. The document will probably have a limited impact on financial markets, as it would not bring fresh clues to the trading table.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it posted a higher high and a higher low, but it trades around its opening level. It holds a handful of pips above a bearish 20 Simple Moving Average (SMA) while the longer moving averages remain directionless, far above the current level. At the same time, technical indicators turned flat below their midlines, suggesting decreased buying interest.

In the near term, and according to the 4-hour chart, EUR/USD retains a mildly bullish technical stance. The pair is consolidating above its 20 and 100 SMAs, with the shorter one aiming to cross above the longer. Finally, technical indicators remain within positive levels, with the Momentum recovering but the Relative Strength Index (RSI) losing ground at around 58.

Support levels: 1.0585 1.0540 1.0495

Resistance levels: 1.0650 1.0690 1.0725

View Live Chart for EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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