EUR/USD Forecast: Lagarde’s G20 Appearance and US Inflation in the Limelight

Highlights

• The EUR/USD gained 0.13% on Wednesday, ending at $1.06193.
• ECB meeting minutes from September to draw investor attention amid policy shifts.
• US CPI Report could refuel Fed rate hike discussions.

Wednesday Overview

On Wednesday, the EUR/USD rose by 0.13%. Following a 0.37% gain on Tuesday, the EUR/USD ended the day at $1.06193. The EUR/USD fell to a low of $1.05795 before reaching a high of $1.06347.

ECB Monetary Policy Meeting Minutes and the IMF in Focus

The ECB monetary policy meeting minutes will garner investor interest. Recent ECB speeches have signaled an end to the ECB monetary policy tightening cycle. However, euro area inflation remains elevated, supporting the higher-for-longer interest rate outlook. A deviation from recent ECB member guidance to leave interest rates unchanged would need consideration.

There are no euro area economic indicators to consider on Thursday. The lack of stats will leave the IMF/World Bank Annual Meetings and news updates from the Middle East in focus.

ECB President Christine Lagarde will attend the G20 Finance Ministers and Central Bank Governors meeting. Comments relating to inflation, the economic outlook, and monetary policy will influence the buyer appetite for the EUR/USD.

US CPI Report and Weekly Jobless Claims in the Spotlight

The US CPI Report will garner investor interest on Thursday. After the higher-than-expected producer price numbers, a pickup in inflationary pressures could reignite Fed rate hike bets.

Economists forecast the US annual inflation rate to soften from 3.7% to 3.6% and the core inflation rate to ease from 4.3% to 4.1%.

Weekly jobless claims forecasts signal tight labor market conditions. Economists predict initial jobless claims to increase from 207k to 210k.

Tight labor market conditions support wage growth. An upward trend in wages fuels consumer spending and demand-driven inflationary pressures. Higher interest rates raise borrowing costs, resulting in firms cutting costs, including staff and wages. Falling wages could force consumers to curb spending, easing demand-driven inflationary pressures.

However, the US CPI Report will likely have more influence on the appetite for the US dollar.

Beyond the numbers, news updates from the Middle East and FOMC member speeches need consideration. FOMC member Raphael Bostic is on the economic calendar to speak on Thursday.

Short-Term Forecast:

Near-term EUR/USD trends rest in the hands of the US CPI Report and news updates from the Middle East. A hotter-than-expected US CPI Report would support buyer appetite for the US dollar. An escalation in the Middle East conflict would also fuel demand for the US dollar as a safe haven currency.

EUR/USD Price Action

Daily Chart

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

A EUR/USD move through the $1.06342 resistance level would give the bulls a run at the 50-day EMA.

The US CPI Report, central banks, and news updates from the Middle East will dictate EUR/USD movements.

A pickup in US inflationary pressures would support a EUR/USD return below $1.06 to target the $1.05230 support level.

The 14-period Daily RSI, 48.62, supports a EUR/USD drop below $1.06 before entering oversold territory.

4-Hour Chart

The EUR/USD remains 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 drop below $1.06 would bring the 50-day EMA and $1.05230 support level into play.

However, a EUR/USD move through the $1.06342 resistance level would give the bulls a run at the 200-day EMA.

The 14-period RSI on the 4-hour chart, 62.48, supports a EUR/USD break above the $1.06342 resistance level before entering overbought territory.