EUR/USD Forecast: Will it hold onto gains on Super Thursday?

The EUR/USD is trading on higher ground after USD weakness.
The ECB decision and also US inflation are set to move the pair.
The technical picture is improving for the pair.

Yohay Elam FXStreet

The EUR/USD is trading in the higher part of the recent tight range, above 1.1600. The US Dollar lost some ground on Wednesday. US Treasury Secretary Steven Mnuchin is leading an effort to talk with China on trade concerns. The optimism has helped improve the mood. A week has passed since the deadline for public comments on American plans to impose tariffs on $200 billion of Chinese goods. So far, the Administration has not announced the implementation. Hopes for a resolution pushed the greenback lower.

Brexit has also influenced the Euro. The European Union is reportedly willing to redraft the text on the Irish backstop, showing some flexibility. On the other hand, other reports suggest the EU will demand concessions from the UK after the Conservative Party conference later this month.

Another dollar downer came from relatively weak Producer Price Index numbers for August. Both headline and core prices dropped on a monthly basis.

More critical inflation data is released today: the Consumer Price Index. Core CPI hit a cycle high of 2.4% YoY in July but is not expected to advance in August. The Federal Reserve remains on course for raising interest rates later in the month.

See: US inflation preview: Expect a straightforward USD reaction, the Fed may find its limits

For the EUR/USD, the primary event of the day is the decision by the European Central Bank. The ECB is set to maintain its policy unchanged but will also release fresh inflation and growth forecasts. They may opt for a downgrade of the outlook due to recent figures and also trade concerns.

President Mario Draghi will hold a press conference and will comment on the situation, on the eve of the planned tapering in the ECB's bond-buying program. So far in 2018, Draghi dragged the EUR/USD on all occasions.

See: ECB Preview: Dovish Draghi set to dampen tiny tightening, EUR/USD bears are waiting

Another event to note is the rate decision by Turkey's central bank. The Turkish Lira tumbled down as inflation raged, a diplomatic crisis with the US, and the refusal of the CBRT to raise rates. This may change today. Some euro-zone banks are exposed to Turkey and the decision today has a broader impact on emerging markets.

See: CBRT Preview: Can a 425 bps hike stabilize the Lira?

EUR/USD Technical Analysis

The EUR/USD finally overcame the downtrend resistance line that capped it since late August. Momentum and the Relative Strength Index both point to the upside. On the other hand, the break is not that convincing and the pair is not going anywhere fast.

1.1660 capped the pair last week and serves as immediate resistance. 1.1695 defends the round number of 1.1700 and held the EUR/USD down in late August. 1.1735 was the peak of July and it is closely followed by July's quadruple top of 1.1750.

1.1605 was a temporary cap earlier in the week and provided support last week. 1.1565 was the low point this week and is already a significant support line. 1.1530 is a triple-bottom and a considerable support.

More: EUR/USD rests on strong support ahead of the ECB – Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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