EUR/USD remains depressed ahead of the German inflation release

EUR/USD extends its reversal from highs above 1.1600 earlier on Friday, and trades near 1.1560 following a batch of mixed Eurozone figures, as traders brace for the preliminary German inflation report. From a wider perspective, however, the pair remains on track to a 0.5% weekly gain, as hopes that the US Federal Reserve will lower interest rates further in December keep weighing on the US Dollar.

Previous Eurozone data has shown a mixed picture. Retail Sales declined against expectations in October, while the Import Price Index came above forecasts and the Unemployment rate remained unchanged, despite lower-than-expected job creation. In France, the Gross Domestic Product (GDP) confirmed the preliminary estimations, but consumer inflation remained steady, against market expectations of growing price pressures.

Trading activity remains subdued on Friday, with US markets operating at half throttle amid the Thanksgiving festivities and an outage at CME Group's data center, which disrupted trade on its currency platform.

Later on the day, the President of the Bundesbank and ECB member Joachim Nagel might provide some further guidance for the Euro. The US calendar is void due to the Thanksgiving bank holiday.

Rising hopes of Fed rate cuts are weighing on the US Dollar's recovery

• The US Dollar is picking up amid a mild rebound in US Treasury yields, but upside attempts remain limited. The US Dollar Index (DXY) is on track for its worst weekly performance since July. Investors are forecasting several Fed interest rate cuts over the next 12 months, while most of the world's major central banks, including the European Central Bank (ECB), have reached the end of their easing cycles.
• Macroeconomic data from Germany released earlier on Friday revealed that retail consumption contracted at a 0.3% pace in October, against market expectations of a steady 0.2% increase. Year on Year, German Retail Sales rose at a 0.9% pace, from an upwardly revised 0.8% in September.
• The German Import Price Index contracted 1.4% year-on-year in October, after a 1% fall in September, but above the 1.6% decline forecasted by the market. The monthly index grew 0.2%, at the same pace as in September, against expectations of a flat reading.
• Later on, data from Destatis revealed that net employment grew by 1,000 jobs in October, retracing the 1,000 net loss seen in September, but well below the 5,000 gain forecasted by the market. The unemployment rate remained steady at 6.3%.
• In France, the Q3 Gross Domestic Product (GDP) confirmed the preliminary estimations of a 0.5% growth, while the CPI year-on-year remained steady, growing at a 0.8% pace in October, against market expectations of an acceleration to 1%.
• Later on Friday, the preliminary German Harmonized Index of Consumer Prices (HICP) is expected to have accelerated to a 2.4% year-on-year pace in November, from 2.3% in October, although the monthly reading is seen contracting 0.6% following a 0.3% rise in October.

Technical Analysis: Under growing bearish pressure towards 1.1550

The EUR/USD came under increasing bearish pressure during Friday's European session, following a rejection at 1.1600 earlier on the day. The 4-hour Relative Strength Index (RSI) has entered nearish territory below the 50 level, while the Moving Average Convergence Divergence (MACD) has crossed below the signal line, underlining the increasing bearish momentum.

A confirmation below the previous resistance level of 1.1550 (around November 21 and 24 highs). would give bears confidence to aim for the 1.1500 psychological level ahead of the November 5 lows, near 1.1470. The channel bottom, now around 1.1420, looks too distant a target for the coming sessions.

A bullish reaction, on the contrary, would need to break the mentioned channel top around 1.1615 to confirm a trend shift and bring the October 28 high, near 1.1670, into focus. Further up, the next target is the October 17 high, right below 1.1730.