EUR/USD Forecast: Impact of ZEW Economic Sentiment and US CPI Report

Highlights

• The EUR/USD gained 0.05% on Monday, ending the session at $1.07645.
• On Tuesday, German and Eurozone ZEW Economic Sentiment numbers need consideration.
• The US CPI Report will be the focal point.

Monday Overview

The EUR/USD gained 0.05%. After a 0.32% loss on Friday, the EUR/USD ended the day at $1.07645. The EUR/USD rose to a high of $1.07790 before falling to a low of $1.07415.

ZEW Economic Indicators in the Spotlight

On Tuesday, ZEW Economic Sentiment indicators for Germany and the Eurozone will draw investor interest.

Recent economic indicators from Germany and the Eurozone sent mixed signals. Survey-based data suggested an improving macroeconomic backdrop. In contrast, non-survey-based data pointed to a weakening demand environment.

Weaker-than-expected Economic Sentiment numbers could impact the buyer appetite for the EUR/USD. While the numbers may not influence the ECB, weak numbers could fuel recessionary jitters. Notably, a deteriorating macroeconomic could force the ECB to reconsider the timing of rate cuts.

Economists forecast the German ZEW Economic Sentiment Indicator to fall from 9.8 to 8.8 in December. Economists expect the Eurozone ZEW Economic Sentiment indicator to decline from 13.8 to 11.2.

Beyond the numbers, ECB member commentary also needs consideration. ECB Executive Board member Elizabeth McCaul is on the calendar to speak. References to inflation and discussions on rate cuts would move the dial.

US CPI Report in the Spotlight

On Tuesday, the all-important US CPI Report will draw investor interest. Sticky inflation could force the Fed to maintain inflation at current levels. A more hawkish Fed rate path would impact borrowing costs and reduce disposable income. Downward trends in disposable income could impact consumer spending and dampen demand-driven inflation.

Economists forecast the annual rate of inflation to soften from 3.2% to 3.1%. Significantly, economists expect core inflation to hold steady at 4.0%.

The CPI Report could influence the Fed’s economic projections and the tone of Fed Chair Powell’s press conference.

Short-Term Forecast:

Near-term EUR/USD trends will likely depend on the US CPI Report (Tues), the Fed (Wed), and the ECB (Thurs). Sticky US inflation, a hawkish Fed, and a dovish ECB could impact the appetite for the EUR/USD and bring the $1.05 handle into play.

EUR/USD Price Action

Daily Chart

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

A EUR/USD move through the 50-day EMA and the $1.07838 resistance level would bring the $1.09294 resistance level into view.

ZEW Economic Sentiment Indicators and the US CPI Report are the focal points.

However, a EUR/USD break below the 200-day EMA would bring the $1.06342 support level into play.

The 14-period Daily RSI, 45.84, suggests a EUR/USD drop to the $1.07000 handle before entering oversold territory.

4-Hour Chart

The EUR/USD held below the 50-day and 200-day EMAs, affirming bearish price signals.

A EUR/USD move through the $1.07838 resistance level and 200-day EMA would support a move to the 50-day EMA.

However, a EUR/USD fall through the $1.07500 handle would give the bears a run at the $1.06342 support level.

The 14-period RSI on the 4-hour chart, 43.68, suggests a EUR/USD drop to $1.07 before entering oversold territory.