EUR/USD Forecast: Eurozone Inflation and Lagarde’s Speech Impact Analysis

Highlights

• The EUR/USD gained 0.05% on Thursday, ending the session at $1.08519.
• On Friday, Eurozone inflation numbers and ECB President Christine Lagarde will be in focus.
• Later in the session, Fed speakers could also affect EUR/USD trends.

Thursday Overview

The EUR/USD gained 0.05% on Thursday. After a 0.30% decline on Wednesday, the EUR/USD ended the day at $1.08519. The EUR/USD fell to a low of $1.08299 before rising to a high of $1.08956.

Eurozone Inflation and ECB President Lagarde Are in the Spotlight

On Friday, finalized Eurozone inflation figures for October will garner investor interest. Inflation and wage growth remain focal points for central banks tackling consumption and demand-driven inflation.

Downward revisions to preliminary numbers could kickstart early discussions on ECB interest rate cuts. According to preliminary figures, the Eurozone annual inflation rate softened from 4.3% to 2.9% in October.

After the recent revisions to growth forecasts, ECB commentary also needs monitoring. ECB President Christine Lagarde is on the calendar to speak on Friday. A shift in sentiment toward discussions about interest rate cuts would affect the buying appetite for the EUR/USD.

Recently, ECB President Lagarde said the ECB would refrain from rate-cut chatter over the next two quarters.

The US Housing Sector and the Fed in Focus

On Friday, US housing sector figures for October will draw investor interest. A slump in building permits and housing starts could signal a housing sector recession. The US construction sector contributes less than 10% to the outlook. However, a deteriorating housing market affects consumer confidence and spending.

A downward trend in spending would ease demand-driven inflationary pressure. However, the trend could reignite fears of a hard landing.

While housing sector numbers need consideration, Fed speakers could have more influence on the markets. FOMC members Mary Daly, Austan Goolsbee, and Michael Barr are on the calendar to speak. Views on inflation, the economy, and interest rates need monitoring.

Short-Term Forecast:

The ECB and Fed plan to end rate hike cycles. Ending rate hike cycles brings the debate of interest rate cuts into focus. A gloomier economic outlook for the Eurozone suggests an ECB rate cut before the Fed. However, Fed comments about raising rates too aggressively could tip the monetary policy divergence scales toward the EUR.

EUR/USD Price Action

Daily Chart

The EUR/USD held above the 50-day and 200-day EMAs, sending bullish price signals.

A EUR/USD return to $1.09 would give the bulls a run at the $1.09294 resistance level.

Eurozone inflation and central bank speeches will be the focal points.

Hawkish Fed comments and softer-than-expected Eurozone inflation numbers would support a EUR/USD fall to the $1.07838 support level. A break below the $1.07838 support level would bring the 200 EMA into view.

The 14-period Daily RSI, 66.14, indicates a EUR/USD return to $1.09 before entering overbought territory.

4-Hour Chart

The EUR/USD remains above the 50-day and 200-day EMAs, affirming bullish price signals.

A EUR/USD move to $1.09 would bring the $1.09294 resistance level into play.

However, a EUR/USD fall below the $1.07838 support level and the 50-day EMA would give the bears a run at the 200-day EMA. Buying pressure will likely intensify at the $1.07838 support level. The 50-day EMA is confluent with the support level.

The 14-period RSI on the 4-hour chart, 62.71, indicates a EUR/USD move to the $1.09294 resistance level before entering overbought territory.