EUR/USD Daily Price Forecast – EUR/USD Consolidates Above 1.16 Handle Ahead of US Inflation Data

The EUR/USD is holding above 1.16, despite having faced rejection at the pennant hurdle (lower end now acting as resistance) on Wednesday. As of writing this article, the pair is trading at 1.1604 down 0.05% on the day and the lower end of the pennant is located at 1.1626. The pennant breakdown and the sharp rise in the spread between the 10-year Italian bond yield and the 10-year German bond yield witnessed last week had put the bears in a commanding position. However, the common currency has defied gravity this week, possibly due to the calm in the bond markets. For instance, the Italy-German yield spread now stands at 247 basis points vs Friday’s high of 253 basis points. As for today, the currency pair could continue to trade above 1.16 on lack of first tier data releases in the Eurozone and US. The absence of fresh news on Italy could keep the bond markets calm and the EUR better bid above 1.16. If the Italy-German yield spread spikes, then the EUR will likely fall back below 1.16.

Chinese Retaliatory Tariff & No-Brexit Deal Scenario Weigh Down Both Sides of Pair

The pair has currently found support near the 1.1575 level and Euro is expected to remain noisy in short term as profit booking activity has failed to drive the momentum in favor of either side of the currency pair. The US dollar continues to strengthen overall as Sino-U.S trade wars continue to boost support for Greenback in global market, while No-Deal Brexit Scenario is adding additional bearish influence on EURO owing to lack of solid progress. China had already announced additional tariffs of 25 percent on $16 billion worth of U.S. imports from fuel to autos. The tariffs will apply to billions of dollars in U.S. gasoline, diesel and other oil products, though not crude which has resulted in slowdown of US Greenback’s momentum. As multiple factors try to push the respective currencies forward but both sides lack solid force to make a clear breakout the pair has consolidated above 1.16 and is expected to remain range bound during today’s trading session.

Moving forward investors are focused on US PPI data which is expected to see slightly dovish outcome and initial Jobless claims data scheduled to release later today for triggers to breakout of consolidation. The pair is expected to see further volatility during Friday’s session over release of CPI data in North American market session. A better than expected data could help USD’s momentum while softer data could help EURO target resistance levels around 1.1667 and 1.1715 price handles respectively. Expected support and resistance for the pair are at 1.1572 / 1.1550 / 1.1525 and 1.1667 / 1.1715 / 1.1746 respectively.