EUR/USD Price Forecast – EUR/USD above 1.13 Handle Ahead of Draghi’s speech Bulls & Bears Wage War for ControlThe pair moved off the daily highs ahead EZ CPI today while Brexit continues to weigh
EUR/USD was trodden down overnight over Brexit turmoil with UK ministers quitting their positions in protest to PM May’s negotiated deal with the EU that effectively does not meet the UK’s electorate’s vote. The threat of a challenge to PM May’s authority plunges European politics into higher levels of uncertainty. It increases the chances that the U.K. will exit with no deal at all, risking significant economic disruption for both sides of the deal. However, EUR/USD got a lift when the dollar buckled despite the U.S. Census Bureau US retail sales data in October increasing by 0.8%, exceeding the market’s expectations of 0.5%. The move coincided with a reversal on Wall Street that enabled the euro to rally with an unwind in yen longs supporting EUR/JPY’s recovery.
EZ CPI Outcome Will Solidify Directional Bias of Unstable Price Momentum
As of writing this article, EURUSD pair is trading at 1.1346 up by 0.16% on the day. USD also faced additional bearish pressure from profit taking in the dollar on China/US trade talk news. The headlines that China had moved a piece on the chess board in the US favor started to lift risk appetite. Investors now await a speech from ECB President Draghi and the common currency could pick up a strong bid if Draghi downplays Italy’s budget crisis and reaffirms plans to end the QE program. However the pair may fall below 1.13 handle if Draghi sounds cautious, forcing markets to price-in a delay in the rate hike, currently seen happening at the end of 2019.On release front, European calendar is scheduled to release CPI data while US calendar will see release of Industrial production data.
The Eurozone October inflation report should see core CPI unchanged at around 1.1% but a miss to the downside will likely remind markets of the divergence between the Fed and other Central Banks falling in favor of the greenback. From a technical perspective, the pair has been steadily recovering along an ascending trend-channel formation on the 1-hourly chart and the immediate upside resistance is pegged near the 1.1370 region. On the flip side, the 1.1300 handle now seems to protect the immediate downside, which if broken is likely to accelerate the slide towards the 1.1250-45 horizontal support before the pair eventually breaks through YTD lows, around the 1.1215 level, and aim towards challenging the descending trend-channel support, currently near the 1.1200 round figure mark.