EUR/USD Forecast: US Consumer Optimism and Fed Speakers in Focus

Highlights

• The EUR/USD gained 0.16% on Friday, ending the session at $1.06842.
• Weaker-than-expected Michigan Consumer Sentiment figures drove buyer demand for the EUR/USD on Friday.
• On Monday, US consumer optimism and Fed speeches will draw investor interest ahead of the US CPI Report on Tuesday.

Friday Overview

The EUR/USD gained 0.16% on Friday. After a 0.39% decline on Thursday, the EUR/USD ended the day at $1.06842. The EUR/USD fell to a low of $1.06561 before rising to a high of $1.06928.

Caution Likely Ahead of GDP and Inflation Numbers

Investor caution could grip the EUR/USD at the start of the week. Eurozone GDP (Tues), trade (Wed), and inflation (Fri) will be in the spotlight this week. The numbers could influence the ECB interest rate trajectory. Recent speeches signal an ECB committed to bringing inflation to target at the expense of the economy.

Sticky inflation could force the ECB to maintain a hawkish interest rate path to curb inflation. A higher interest rate environment raises borrowing costs and reduces disposable income. The downward trend in disposable income would force consumers to cut spending on non-essential items.

Q3 GDP numbers for the Eurozone will likely reflect the impact of ECB monetary policy and inflation on the economy. GDP and inflation figures are out on Tuesday and Friday, respectively.

With no euro area economic indicators for investors to consider on Monday, ECB commentary needs monitoring.

US Economic Sentiment and the Fed in Focus

The IBD/TIPP Economic Optimism Index will garner investor interest on Monday.

Economists forecast the IBD/TIPP Economic Optimism Index to increase from 36.3 to 40.2. Below 50 reflects consumer pessimism toward the economy and the economic outlook.

A pessimistic outlook could impact consumer spending and soften demand-driven inflationary pressures. A negative consumer spending outlook may fuel concerns about the US economy. US private consumption contributes over 60% to the US economy.

Beyond the numbers, investors must monitor Fed speakers ahead of US inflation figures on Tuesday. FOMC voting member Lisa Cook is on the calendar to speak. Comments relating to inflation, the economy, and interest rates will move the dial.

Short-Term Forecast:

Investor sentiment toward the Eurozone economy will likely cap the upside for the EUR/USD. Weaker-than-expected Eurozone GDP numbers and sticky US inflation figures could tip monetary policy divergence toward the US dollar. Bets on a hawkish Fed rate path may return the EUR/USD below the $1.06 handle.

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 return to $1.07 would support a move to the 200-day EMA.

Central bank commentary and US consumer optimism figures will be the focal points on Monday.

However, a fall through the 50-day EMA would give the bears a run at the $1.06342 support level and $1.06.

The 14-period Daily RSI, 55.55, suggests a EUR/USD move to the 200-day EMA 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 $1.07 would give the bulls a run at the $1.07838 resistance level.

However, a break below the 50-day EMA would support a move toward the 200-day EMA and the $1.06342 support level. Buying pressure may intensify at $1.06360. The 200-day EMA remains confluent with the $1.06342 support level.

The 14-period RSI on the 4-hour chart, 49.89, suggests a EUR/USD fall through the 200-day EMA and the $1.06342 support level before entering oversold territory.