The EUR/USD pair is about to end the week with minor gains, boosted by a decline of the US dollar in the market. Greenback was among the worst performers in the currency market during the last five days as the expected date of the Federal Reserve liftoff continues to move away; US inflation data on Thursday limited the decline. The euro was not particularly strong as data continued to show some slowdown.
Next week will be of particular importance for the euro. The main event will be the European Central Bank (ECB) meeting on Thursday. No change in monetary policy is expected neither an extraordinary announcement. But with inflation trending lower, talks about the ECB doing more has increased lately. The Governing Council member, Ewald Nowotny spoke on Thursday about the central bank missing its inflation target and about the use of additional structural instruments to bright growth back. The other key report will be the preliminary Manufacturing PMI reading of the euro area that will show how the sector did during October.
If the ECB remains in its status quo (keeping the purchase program unchanged) and the PMIs do not disappoint, the euro could receive some impulse. One of the main risks is Mario Draghi, who could talk down the euro during the press conference.
No relevant economic reports will come from the US and attention will remain on Fed’s officials speeches and interviews as investors look for clues about when the central bank will raise rates. The next meeting will be October 27/28, no change is expected. Some officials continue to mention that they would like a rate hike during 2015 but economic data continues to reduce the odds of a December liftoff.
View the Live chart of the EUR/USD
The weekly chart shows EUR/USD standing above an uptrend line and also the 20 and 55 weekly moving averages that offer support at 1.1160 and 1.1050 respectively. In the short term it continues to move sideways, between 1.1100 and 1.1400. During the week it approached 1.1500 but it was rejected from those levels opening the doors for a corrective move.
The area around 1.1500 continues to be the key resistance. A consolidation on top would clear the way for more gains in the medium term with a short term target at 1.1700. But as long as it remains below the risk to the downside is big. The current decline could extend toward the 1.1115 without creating any major threat. But below, attention would turn to the 55 week MA and to the uptrend line that currently stands around 1.1020/30: if it is broken, then 1.0800 would be an easy target.
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