EUR/USD Forecast: Can euro crack 1.1700 ahead of the weekend?

• EUR/USD has gone into a consolidation phase before testing 1.1700.
• Following the ECB-inspired rally, EUR/USD awaits EU growth data and US inflation report.
• Near-term technical outlook points to a correction before the next leg up.

Fueled by the European Central Bank's (ECB) policy statement and the broad-based dollar weakness, EUR/USD has climbed to its highest level in a month near 1.1700 before going into a consolidation phase on Friday.

The shared currency managed to capitalize on the ECB's cautious tone regarding the inflation outlook. ECB President Christine Lagarde acknowledged that high inflation was expected to last longer than initially anticipated while keeping a relatively optimistic view of the economic state. However, it's also worth noting that Lagarde voiced her opposition to market pricing of a rate hike in late-2022.

Nevertheless, the euro was able to outperform its rivals as investors seem to be thinking that the ECB could prioritize price stability over growth in the near term.

Friday's data could make or break this view. The euro area Gross Domestic Product (GDP) is expected to expand by 3.5% in the third quarter following a 14.3% growth in the second quarter. In the meantime, the data from Germany revealed that the economy grew by 1.8% on a quarterly basis, missing the market expectation of 2.2%.

A weaker-than-expected GDP print could make it difficult for the common currency to preserve its strength ahead of the weekend. On the flip side, a strong reading is likely to help EUR/USD push higher.

In the second half of the day, the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, data from the US will be looked upon for fresh impetus as well. The Core PCE Price Index, which excludes volatile food and energy prices, is forecast to tick higher to 3.7% on a yearly basis in September from 3.6%. On Thursday, the US Bureau of Economic Analysis reported that the annualized Real GDP grew by 2% in the third quarter. With this figure falling short of analysts' estimate of 2.7%, the dollar faced renewed selling pressure. A soft inflation report could suggest that the Fed might opt out to wait until December before starting to reduce asset purchases and force the dollar to remain on the back foot ahead of the weekend.

EUR/USD technical analysis

With Thursday's upsurge, EUR/USD broke above 1.1670 resistance but lost its momentum before reaching 1.1700. The Relative Strength Index (RSI) indicator on the four-hour chart is edging lower after reaching 70, suggesting that the pair is now making a technical correction.

Currently, the pair is trying to flip 1.1670 into support and buyers could try to test 1.1700 as long as this level holds. Above 1.1700 (psychological level), the next resistance aligns at 1.1720 (Fibonacci 50% retracement of September downtrend) before 1.1770 (Fibonacci 61.8% retracement).

On the downside, 1.1670 (Fibonacci 38.2% retracement, former resistance) is the first support ahead of 1.1635 (50-period SMA) 1.1600 (psychological level, 100-period SMA).