EUR/USD Forecast: Euro Area Data and Central Bank Speeches to Dictate Trends

Highlights

• The EUR/USD slipped by 0.07% on Monday, ending the session at $1.07172.
• Euro area services PMIs impacted the EUR/USD ahead of a busy week of central bank speeches.
• On Tuesday, German industrial production and Eurozone producer prices will draw interest. However, ECB and Fed speeches may have more influence.

Monday Overview

The EUR/USD slipped by 0.07% on Monday. After a 1.00% rally on Friday, the EUR/USD ended the day at $1.07172. The EUR/USD rose to a high of $1.07563 before falling to a low of $1.07163.

German Industrial Production and Eurozone Producer Prices in the Spotlight

On Tuesday, the German economy remains in the spotlight. After an unexpected increase in German factory orders in September, a pickup in industrial production could support the appetite for the EUR/USD. Economists forecast industrial production to fall by 0.1%, following a 0.2% decline in August.

The German manufacturing sector contributes less than 30% to the German economy. However, a contraction across the services sector and weak industrial production figures would signal a prolonged German recession.

Eurozone producer prices could have more influence. A more marked decline in producer prices will signal a deteriorating demand environment. Producers cut costs to win contracts in a low-demand environment. Economists forecast Eurozone producer prices to fall by 12.5% year-over-year in September. Producer prices were down 11.5% in August.

With the German economy and inflation in focus, investors must monitor ECB commentary. ECB Executive Board members Luis de Guindos, Elizabeth McCaul, and Andrea Enria are on the calendar to speak on Tuesday. Comments relating to the Eurozone economy, inflation, and monetary policy need consideration.

FOMC Members Remain in the Spotlight

On Tuesday, FOMC member commentary will garner investor interest. Fed Vice Chair John Williams and FOMC voting members Michael Barr, Lorie Logan, and Christopher Waller will speak today.

The markets are betting on the Fed ending its rate hike cycle and a June 2024 rate cut. Deviation from market expectations will influence the appetite for the EUR/USD. Fed Vice Chair Williams tends to have more sway with the markets.

Short-Term Forecast:

Near-term trends hinge on euro area recessionary fears and Fed speeches. A deteriorating macroeconomic environment across the euro area and hawkish Fed speeches could send the EUR/USD into retreat.

EUR/USD Price Action

Daily Chart

The EUR/USD remained above the 50-day EMA while sitting below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

A EUR/USD break above the 200-day EMA would give the bulls a run at the $1.07838 resistance level.

Euro area economic indicators and central bank speeches are the focal points on Tuesday.

However, a fall through the 50-day EMA would bring the $1.06342 support level into play.

The 14-period Daily RSI, 59.07, indicates a EUR/USD break above the 200-day EMA and $1.07838 resistance level before entering overbought territory.

4-Hour Chart

The EUR/USD remains above the 50-day and 200-day EMAs, affirming bullish price signals. Significantly, the 50-day EMA pulled away from the 200-day EMA after the bullish cross on Monday, also a bullish price signal.

A EUR/USD move through the $1.07838 resistance level would support a run at $1.08.

However, a break below the 50-day EMA and $1.06342 support level would bring the 200-day EMA into play.

The 14-period RSI on the 4-hour chart, 59.57, suggests a EUR/USD break above the $1.07838 resistance level before entering overbought territory.