EUR/USD Retreats after Euro Zone Inflation Slows in November; Focus Shifts to Powell Speech

The Euro is edging higher against the U.S. Dollar on Wednesday as investors await the release of key U.S. economic data early in the session and comments from Federal Reserve Chairman Jerome Powell late in the day.

Traders will get the opportunity to react to the ADP Non-Farm Employment Change report at 13:15 GMT. It is expected to show the private sector of the economy added 196K jobs in November, lower than the 239K reported in October.

Data on Preliminary GDP is also expected to be released. It is expected to show the economy grew 2.8% last quarter, up from the previously reported 2.6%.

The JOLTS Job Openings report, due to be released at 15:00 GMT, is expected to come in at 10.24 million, down from the previously reported 10.72 million.

Finally, traders are hoping for fresh insights on the outlook for monetary policy and the broader U.S. economy from Fed Chair Jerome Powell, who is set to speak at a Brookings institution at 18:30 GMT.

A hawkish Powell could drive up Treasury yields and the U.S. Dollar, putting pressure on the Euro.

At 10:42 GMT, the EUR/USD is trading 1.0366, up 0.0036 or +0.35%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $95.28, down $0.07 or -0.07%.

Euro Zone Inflation Eases

Although the EUR/USD is up for the session, it has eased since the release of a report that showed inflation in the Euro Zone slowed slightly in November.

The initial data from Europe’s statistics office showed headline inflation at an annual 10% this month – representing a 0.6 percentage point fall from October.

Lower inflation figures could be a reflection of recent increases in interest rates and could mean smaller, or less, rate hikes in the coming months. Market expectations point to an increase of 50 basis points in December.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through 1.0497 will signal a resumption of the uptrend. A move through .9730 will change the main trend to down.

The minor trend is also up. A trade through 1.0223 will change the minor trend to down. This will confirm the shift in momentum.

Trader reaction to the 50% level at 1.0366 is likely to determine the direction of the EUR/USD on Wednesday.

A sustained move over 1.0366 could trigger a surge into the main top at 1.0497, followed by 1.0560.

A sustained move under 1.0366 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the support cluster at 1.0233 – 1.0216.