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EUR/USD Forecast: German Inflation, US GDP Numbers for Q3, and the Fed in Focus

By:
Bob Mason

German inflation softening to 3.5% may influence ECB's rate path. US GDP and Fed comments add to EUR/USD analysis.

EUR/USD Forecast

Highlights

  • The EUR/USD rose by 0.36% on Tuesday, ending the session at $1.09926.
  • Hawkish ECB comments and dovish Fed comments delivered the gains.
  • German inflation numbers and the US economic calendar are focal points today.

Tuesday Overview

The EUR/USD rose by 0.36% on Tuesday. Following a 0.19% gain on Monday, the EUR/USD ended the day at $1.09926. The EUR/USD fell to a low of $1.09344 before rising to a Tuesday high of $1.10089.

German Inflation and Eurozone Consumer Sentiment in Focus

On Wednesday, economic sentiment figures for the Eurozone and German inflation numbers will draw investor interest. A pickup in economic sentiment and sticky inflation would support ECB plans to keep a hawkish rate path.

Improving economic sentiment could support staff increases and wage growth. An upward trend in hiring could fuel consumer spending and lead to demand-driven inflation. A pickup in demand-driven inflation would force the ECB to keep rates elevated to curb inflation.

Economists forecast the Eurozone Economic Sentiment Indicator to increase from 93.3 to 93.7 in November.

While Economic Sentiment numbers need consideration, German inflation figures will be the focal point. Softer-than-expected German inflation numbers could ease the need for a hawkish ECB rate path. Economists forecast the German annual inflation rate to soften from 3.8% to 3.5%.

With inflation in focus, investors must consider ECB comments.

US GDP and the Fed in Focus

On Wednesday, US GDP and Fed commentary also need consideration. An upward revision to the first estimate GDP number could ease bets on an H1 2024 Fed rate cut. However, investors must consider revisions to real disposable income and savings numbers.

Downward revisions to savings and disposable income would affect consumer spending and dampen demand-driven inflation. According to the first estimate report, the US economy expanded by 4.9% in the third quarter.

With the US economy in the spotlight, FOMC member speeches also need monitoring. FOMC member Loretta Mester is on the calendar to speak.

Short-Term Forecast:

Near-term EUR/USD trends hinge on the euro area and US inflation numbers. Sticky euro area inflation and softer US inflation numbers could tilt monetary policy divergence toward the EUR. A dovish Fed Chair Powell speech would bring $1.11 into play. Fed Chair Powell will wrap up the week on Friday.

EUR/USD Price Action

Daily Chart

The EUR/USD held above the 50-day and 200-day EMAs, sending bullish price signals. Significantly, the 50-day EMA crossed through the 200-day EMA, another bullish price signal.

A EUR/USD move to $1.10 would give the bulls a run at the $1.10720 resistance level.

German inflation, central bankers, and US GDP numbers are focal points.

However, a EUR/USD break below the $1.09294 support level would support a move toward the $1.08500 handle.

The 14-period Daily RSI, 71.96, shows the EUR/USD in overbought territory. Selling pressure could intensify at $1.10.

EUR/USD Daily Chart EMAs send bullish signals.
EURUSD 291123 Daily Chart

4-Hour Chart

The EUR/USD sat above the 50-day and 200-day EMAs. The EMAs reaffirmed bullish price signals.

A EUR/USD return to $1.10 would support a move to the $1.10720 resistance level.

However, a EUR/USD break below the $1.09500 handle would bring the $1.09294 support level and the 50-day EMA into play.

The 14-period RSI on the 4-hour chart, 70.27, shows the EUR/USD in overbought territory. Selling pressure may intensify at $1.10.

4-Hourly Chart EMAs affirm bullish price signals.
EURUSD 291123 4 Hourly Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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