This week, the EUR/USD is in the spotlight as the European Central Bank announces its rate decisions. The US will release its consumer inflation numbers, which is also a major factor. The currency was at 1.0567 – a few points lower than the high from last week of 1.0620.
US inflation data ahead
The EUR/USD will respond to the Consumer Price Index (CPI) which will give more information on the Federal Reserve’s upcoming decision.
The data are expected to reveal that Consumer Price Index headlines (CPIs) have fallen from 2,6% in October, to just 2.5% in Novembre. Analysts anticipate that the data will show a decrease in inflation from 0.25 per cent to 0.1% month-on-month.
Expected to be lower at 3.2% than 3.3%, the core CPI excludes volatile prices for food and energy.
The services sector has been the main reason for the stubbornly high inflation over the last few months. In the last few months, for example, housing costs and insurance rates have continued to increase.
The oil price decline has helped to lower energy prices. Brent, the benchmark for the world, dropped to $71 while West Texas Intermediate was at $67.2.
The US will release these numbers a few weeks after their relatively positive jobs figures. In November, the economy created 227k new jobs. This was higher than the median forecast of 202k. This was also a much larger number than the 36k jobs created, which were upwardly reviewed in the preceding month.
The recent Boeing strikes, which affected one of America’s largest employers, were a major factor in October’s low job numbers. Hurricanes also played a part.
The Federal Reserve’s next meeting will be determined by the economic indicators. The majority of analysts believe the bank won’t cut interest rates like it did in its last two meetings.
Some economists, however, expect that the bank will cut interest rates gradually by starting with a 0.25% reduction.
ECB interest rate decision ahead
Next, the European Central Bank’s (ECB) upcoming interest rate decision will play a key role in the EUR/USD currency pair.
It will be an important decision, as the European economy has not been doing well. Recent data show that in the third-quarter, the economy grew by 0.9% year over year. This is an improvement on the 0.6% recorded previously. On a quarterly basis, it grew 0.4%.
Some of the most important European economies have been struggling. While the French government is in a state of collapse, the regional manufacturing industry continues to struggle. Volkswagen, for example has undertaken a massive cost-cutting program as the company’s growth plummeted.
Analysts expect that the ECB will continue to cut rates in this coming week. This would mean that the rates will be reduced from 3.45% to 3.15%, and deposit facility rates to 3%.
Technical Analysis of EUR/USD
Chart of EUR/USD by TradingView
In September, the EUR/USD pair displayed a double top pattern. Double-tops are one of the more popular bearish signals in the market. The 50-day Exponential Moving Average (EMA) and the 200-day EMA crossed, forming a death-cross.
It then fell to a record low of 1.0333 in November, and bounced up to 1.0610 the following week. The pair has formed a head-and-shoulders pattern in reverse, which is regarded as a bullish signal.
If bulls are able to get the pair above resistance, at 1.0610, then the pair could continue its upward trend this week. Bulls may then continue to rise as they target the 50 day moving average of 1.0710 if this occurs.
The post EUR/USD Forecast ahead of ECB Decision and US Inflation Data may be updated as new information is released
