- US Dollar posts mixed results, while the Euro outperforms during the American session.
- Key events ahead: US Jobless Claims report and remarks from Fed Chair Powell.
- The EUR/USD shows mixed signals but remains above the 20-day SMA.
The EUR/USD rebounded during the American session, recovering from earlier losses and climbing back to the 1.0700 area. This rebound occurred even as the US Dollar strengthened against riskier currencies.
No surprises emerged from the final reading of the German Consumer Price Index (CPI), which showed an annual rate of 3.8%, the lowest level since August 2021. With inflation slowing and the economy appearing on the brink of a recession, the European Central Bank (ECB) is seen as having completed its tightening cycle. This aligns with market expectations, despite the latest comments from ECB policymakers like Lane, who indicated that the central bank should not draw too much comfort from recent inflation figures.
Data released on Wednesday showed that Retail Sales in the Euro area dropped 0.3% in September, slightly above the expected -0.2%. More remarkable, August figures were revised higher from -1.2% to -0.7%. Compared to the same period last year, sales are down 2.9%.
On Thursday, the US will release the weekly Jobless Claims report, and Federal Reserve (Fed) Chair Jerome Powell will participate in a panel discussion titled "Monetary Challenges in a Global Economy." The market will closely watch the comments from Fed officials throughout the week, as they are not coming as dovish as expected, providing support to the US dollar. However, these comments are not expected to impact expectations regarding the monetary policy stance. The market sees the Fed as being done with hiking rates. Next week, the US Consumer Price Index could offer a confirmation.
EUR/USD short-term technical outlook
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The EUR/USD rebounded once again from the 55-day Simple Moving Average (SMA) at 1.0650, staying above a bullish 20-day SMA. Technical indicators offer a mixed perspective with varying risks. A decline below 1.0600 would be a negative development for the bulls, suggesting further losses ahead.
On the 4-hour chart, the price is hovering around the 20-SMA. If it stays above 1.0710 in the next few hours, it could rise further to test 1.0735, which is the last line of defense before reaching the recent high at 1.0755. On the flip side, a slide below 1.0695 would signal the end of the ongoing rebound, exposing 1.0660.
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