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EUR/USD Daily Price Forecast – EUR/USD Upside Limited As Investors Focus on ECB & US CPI amid Italian Political Uncertainties

The ECB is widely expected to keep rates unchanged, so the focus is on the latest staff forecasts and Draghi’s tone at the presser.
Colin First

EUR/USD is navigating the upper end of the multi-day consolidative theme prevailing since the start of September ahead of the ECB event and key US data releases. Spot is looking to advance for the fourth consecutive session so far today, prolonging the rebound after bottoming out in the 1.1530 region at the beginning of the week. The lack of traction in the greenback and the absence of relevant events other than the omnipresent US-China trade effervescence appear to be lending support to the pair above 1.1600 the figure. However, the ongoing up move could be put to the test later today when facing the ECB event and the publication of inflation figures in the US. As of writing this article, the pair is trading near flat at 1.1620 down by 0.05% on the day.

Changes in Italian Political Climate Could Inspire Short Term Momentum Regardless of Support From ECB / US CPI updates

The pair’s momentum moving forward could face first volley of news driven momentum post updates on Draghi’s speech. The markets are expecting President Draghi to sound dovish today, courtesy of the recent slide in inflation. More importantly, the ECB’s QE tapering is set to begin next month and hence, the bank will likely adopt a dovish stance to cushion the bond markets and the economy from the impact of the drop in the bond purchases. If Draghi sounds neutral or hawkish, then the common currency could quickly jump to the recent highs above 1.17. On the flip-side if the US August CPI, due at 12:30 GMT, beats estimates by a wide margin, reinforcing hawkish Fed expectations EURO’s upside could be limited and pair could close the week in favor of US Greenback.

Investors are also focus on news from Italy as economy/finance minister Tria is reportedly threatening to resign over the budget dispute in a phone call with Italian premier Giuseppe Conte. Things are heating up in Italy when it comes to the budget. Yesterday, we had the whole debacle surrounding Tria’s fate as economy/finance minister on news that Five-Star is trying to oust him if he doesn’t give in to their demands on citizens’ income. As another reminder, Tria has been calling for the budget to fall between 1.5% to 1.8% but with the government’s plans of wanting to push forward with tax cuts, citizens’ income, and pension reform, that budget proposal certainly won’t be able to accommodate all of the fiscal measures above. Any changes in Italian political climate or new budget updates could also inspire some measure of volatility. Expected support and resistance for the day are at 1.1565, 1.1526, 1.1500 and 1.1659, 1.1700, 1.1717 respectively.

 

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