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  • Eurozone inflation came in lower than expected at 9.9% in September.
  • Core inflation increased by 0.9% in September and by 6.0% year-over-year.
  • Markets are expecting a 75bps rate hike at ECB’s October 27 meeting.

Today’s EUR/USD forecast is bearish. Data released on Wednesday revealed that consumer inflation in the Eurozone was slightly lower in September than initially thought. Still, it remained considerably high, supporting market predictions of further increases in interest rates before the year was done.

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According to Eurostat, consumer prices in the 19 countries that use the euro went up 1.2% month over month for a 9.9% increase year over year, missing its initial forecast of a 10% increase.

Rising energy costs contributed 4.19 percentage points to the total year-over-year reading, while food and services contributed 2.47 and 1.80 percentage points, respectively. Prices increased by 0.9% for the month for a 6.0% increase year over year when the variable costs of unprocessed food and energy were excluded. This is known as core inflation by the European Central Bank.

The ECB has been raising interest rates to slow the rise in prices to maintain inflation at 2%. Several policymakers have already argued in favor of another 75 basis point increase on October 27 following a combined 125 basis point rise in two meetings, the ECB’s fastest pace of policy tightening ever.

Markets predict that the deposit rate of 0.75% will increase to around 2% by the end of the year, then to about 3% in the next spring before leveling off.

EUR/USD key events today

Investors expect the initial jobless claims and existing home sales reports from the United States. More attention will be given to the initial jobless claims data as it gives insight into the labor market.

EUR/USD technical forecast: Shift in sentiment below 30-SMA

EUR/USD forecast

Looking at the 4-hour chart, we see the price trading slightly below the 30-SMA and the RSI below 50, showing bears have taken over. Bulls could not push the price beyond the 0.9875 resistance level. At this point, bears showed strong momentum when they pushed the price below the 0.9800 support, then the 30-SMA.

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There has been a shift in sentiment. However, to confirm a change in trend, the price needs to make lower lows and lower highs. This would mean retesting the 0.9650 support level.

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