- Risk sentiment remained fragile amid the Middle East tensions.
- US consumer prices increased, mainly driven by an unexpected surge in rental costs.
- The Eurozone labor market shows no signs of weakening.
Monday’s EUR/USD forecast is bearish as the dollar retained its position near a one-week high against the euro as investors avoided risk. Risk sentiment remained fragile amid the Middle East tensions, keeping the dollar strong.
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At the same time, traders were particularly interested in Powell’s speech at the Economic Club of New York later in the week. They hope to gain clarity on the potential trajectory of US interest rates. This interest stemmed from recent data indicating that consumer prices had risen more than anticipated in September.
In September, US consumer prices increased, mainly driven by an unexpected surge in rental costs. However, a consistent decrease in underlying inflation pressures reassured financial markets that the Fed would not raise interest rates in the coming month.
Market expectations primarily point towards the Fed maintaining interest rates when it announces its next monetary policy decision in November. However, there is a 32% chance that the central bank will implement a rate hike in December.
In contrast, despite an environment bordering on recession and a series of record interest rate hikes in the Eurozone, the labor market shows no signs of weakening, according to European Central Bank (ECB) President Christine Lagarde.
The ECB has been increasing interest rates to curb demand. Still, persistently low unemployment is a key reason why some policymakers are concerned about high inflation remaining above target. Moreover, workers continue to enjoy some of the best wage growth in years.
EUR/USD key events today
Investors do not expect major economic events from the US or the Eurozone. As such, EUR/USD could consolidate.
EUR/USD technical forecast: Bulls might pause at the 1.0550 barrier.
The EUR/USD pair is bearish on the charts as the price has gone below the 30-SMA and the RSI below 50. The price is currently pulling back after pausing at the 1.0500 support level. However, the pullback is weak as bulls are making small candles. Therefore, there is a high chance it will pause at 1.0550, the nearest resistance level.
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Bulls will also likely experience resistance from the 30-SMA. Therefore, bears will likely return to retest the 1.0500 support when the price fails to push higher. A break below this support would allow bears to retest the 1.0450 level.
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