EUR/USD Forecast: US inflation misses, dollar extends slump

EUR/USD Current price: 1.1592

  • US inflation rose by less-than-expected in September, weekly unemployment claims also miss.
  • EUR/USD facing critical resistance in the 1.1610/20 region, bullish breakout eyed.

The EUR/USD pair peaked rose to 1.1590 ahead of US data release, its highest since October 3, as speculative interest rushed away from the greenback. Renewed trade tensions, another round of US President Trump criticism on Fed's tightening path and nose-diving equities are behind dollar's weakness. Soaring US government bond yields undermined Wall Street's rally these last few days with equities decline exacerbated Wednesday by comments from US Secretary Mnuchin about future trade relations with China. Following Wednesday Wall Street close, Trump once again took it with Fed's head Powell, saying that the central bank is crazy for rising rates too much. Despite yields pulled back, equities were unable to regain ground, falling further and with the sell-off spreading in Asia and Europe.

Ahead of the US opening, the world's largest economy has just released inflation and employment figures, which pushed the USD further lower across the board. Weekly unemployment claims were up by 214K in the week ended October 5, well below the previous 207K and the expected 206K. US inflation in September rose by less-than-expected, up 2.3% YoY, below the previous 2.7% estimate, and the expected 2.4%. The annual core reading came in at 2.2%, matching the previous reading but below the expected 2.3%. Monthly basis, inflation was up a modest 0.1%.

The EUR/USD pair peaked at 1.1599, holding on to gains a handful of pips below such high, firmly bullish, according to technical readings in the 4 hours chart, as indicators resumed their advances, maintaining their strong upward slopes near overbought levels. In the same chart, the 20 SMA keeps gaining further upward traction below the current level. A major resistance area comes between 1.1610 and 1.1620, where the pair has the 50% retracement of its latest decline, also a mild bearish 100 SMA in the mentioned chart, while the 200 SMA holds a few pips above the 100 SMA. A break through the level should see a further unwinding of USD longs and push the pair up to the 1.1660 region.

Support levels: 1.1570 1.1527 1.1490  

Resistance levels: 1.1620 1.1660 1.1705

View Live chart for the EUR/USD


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