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  • US inflation stays stubbornly high, increasing by 0.4% last month.
  • Markets are pricing in a 13.4% possibility of a 100bps Fed rate hike.
  • The price has pushed above the 30-SMA in the charts, signalling the return of bulls.

Today’s EUR/USD outlook is bullish as the dollar dropped versus most currencies after surging yesterday in response to a hotter-than-expected US inflation report. The euro originally decreased to a two-week low versus the dollar before recovering to trade 0.7% higher at $0.9773.

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The latest FX changes “are signs of a distressed market, freaking out over a mild miss on a data point,” according to Greg Anderson, global head of foreign currency strategy at BMO Capital Markets in New York.

Data revealed that US consumer prices rose more than anticipated in September and that underlying inflation pressures continued to rise. It reinforces expectations that the Federal Reserve will announce another rate increase of 75bps at its policy meeting next month.

Following a 0.1% increase in August, the consumer price index increased by 0.4% last month. Fed funds futures have also priced in a 13.4% possibility of a 100-bps rate hike in response to the data.

Elsewhere, just as governments increase expenditure in response to an energy crisis that will cause a recession, the European Central Bank is considering joining the chaos of volatile global markets to begin winding down its enormous bond holdings.

During the past ten years, the ECB purchased assets worth 5 trillion euros ($4.9 trillion) to boost low inflation and is currently confronting record-high inflation of 10%.

EUR/USD key events today

Investors will pay attention to the US core retail sales, which track the change in the total value of retail sales in the United States, excluding automobiles. It is a crucial consumer spending indicator.

EUR/USD technical outlook: Bullish momentum fueling a rebound from 0.9651

EUR/USD outlook

The 4-hour chart shows the price trading above the 30-SMA and the RSI above 50. Bulls have gathered enough momentum to push the price above the SMA, and sentiment has shifted from bearish to bullish in the RSI. The bears could not go beyond the 0.9651 support level. Bulls made a bullish engulfing candle that confirmed the change in sentiment.

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The price is currently making small-bodied candles showing bulls are taking a profit. Bears might return to retest the 30-SMA before the price heads for resistance at 0.9850.

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