EUR/USD Price Forecast – EUR/USD Range Bound Ahead of Key Macro Economic Releases

Falling Italy-Germany yield differential and dovish Fed expectations could keep the EUR better bid today. However the bullish tone may weaken if the German IFO numbers miss expectations.
Colin First
EURUSD Tuesday
EURUSD Tuesday

The EUR/USD pair on Monday closed well above the lower edge of the contracting triangle, neutralizing the bearish view put forward by Friday’s triangle breakdown. Essentially, the EUR bears have been trapped on the wrong side of the market. Moreover, the dollar was offered across the board yesterday on expectations that the Fed would either remove one hike from next year or by taking out the 2020 hike to reflect that the outlook for growth and inflation is modestly weaker than it was in September. These expectations are likely to keep the EUR/USD better bid ahead of tomorrow’s Fed decision. Further, easing concerns regarding Italy’s budget issue, as represented by the narrowing spread between the 10-year Italian government bond yield and its German counterpart is also expected to provide fundamental support to EURO bulls.

German IFO Update is Deal Breaker for EUR Bulls

As of writing this article, EURUSD pair is trading flat at 1.1344 down by 0.03% on the day. Dollar is facing bearish influence from US President Donald Trump’s tweet in which he suggested that Fed should pause at raising rates and disappointing US macro data which saw Empire State manufacturing index fall to 19 month low while home builder’s index dropped to 3½ year lows. The pair is now trading in range bound fashion as investors await key macro data updates which will decide short to medium term outlook of EURO & USD. On release front today, European market will see the release of German IFO business climate while US market will see release of building permits data ahead of much awaited US Fed rate decision update scheduled to release tomorrow.

A disappointing German IFO business climate data will see the pair break from range bound price action and turn dovish ahead of tomorrow’s Fed rate decision but both upside and downside moves will be considerably limited as investors are exercising cautious tone ahead of US Fed update. When looking from technical perspective, the overnight goodish up-move now seems to have faced rejection near an important confluence resistance – comprising of 200-hour SMA and 50% Fibonacci retracement level of last week’s sharp decline. A follow-through weakness below 1.1335-30 region, will suggest that the near-term bearish trajectory is far from over and accelerate the slide towards the 1.1300 handle. Alternatively, a convincing move beyond the mentioned confluence hurdle has the potential to lift the pair towards resistance near the 1.1375 region en-route to its next major barrier near the 1.1400 round figure mark.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.