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  • EUR/USD tests 1.1700 level and consolidating gains after US dollar sharply fell.
  • The risk appetite has improved as Chinese Evergrande continues to pay ahead of its schedule.
  • EU GDP and US PCE data are eyed today to find further fresh stimulus for trading.

The EUR/USD price is consolidating around 1.1670s after testing the 1.1700 level and is expected to rise during Friday’s European session.

After the US dollar fell, the major currency pair posted its biggest daily gain in five months and hit a monthly high. However, the key short-term resistance levels have questioned the rate’s further advance. Market sluggishness is also to blame for the recent inaction.

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Markets reaffirmed the previous day’s risk appetite by reviewing key data/events for the week, third-quarter US GDP, and monetary policy from the European Central Bank (ECB). Despite the $1.75 trillion stimulus package proposed by President Joe Biden and loud data affecting sentiment, skepticism remains higher. Concern about China’s Evergrande and the real estate market are two other issues deteriorating risk sentiment, not to mention concerns about a Fed tightening.

Nancy Pelosi, the US House of Representatives spokesperson, expressed optimism about the passage of infrastructure, social spending, and climate legislation during a phone call to delay voting on the infrastructure bill. However, global rating giant S&P warns that 33% of Chinese developers, including Evergrande, are at risk of default. The news contrasts with the payment of the second Evergrande coupon, which was also ahead of schedule.

A refreshing multi-month high in inflation expectations earlier in the week also eased in the US and Eurozone. Despite this, central banks continue to face challenges in maintaining austerity policies.

Accordingly, today’s preliminary data on the consumer price index (CPI) for the eurozone, which is expected to rise from 3.4% to 3.7% in October, will be closely watched for signs of renewed momentum. In addition, a quarter’s worth of GDP data in Germany and the eurozone will also be significant. Even if the bloc’s GDP growth slows to 2.0% from 2.2%, many Germans are concerned about relation.

It is expected to rise from 1.6% to 2.2%. If the planned economy proves to be stronger, the ECB’s attempts to downplay inflation expectations will be rejected, causing the US dollar to gain strength.

Nevertheless, it depends on how the US dollar reacts to the personal consumption expenditure (PCE) price index for September, expected to decline from 0.3% to 0.2% every month.

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EUR/USD price technical analysis: Aiming to break 1.1700

EUR/USD price chart analysis

The EUR/USD price did not pause at 200-period SMA (4-hour chart) but reached the critical 1.1700 level and found rejection. The price is now consolidating gains in a very tight range. The volume is slowly drying, absorbing the previously very high volume trades. As long as the price is supported above 200-period SMA, the price will likely break the 1.1700 area and aim for the 1.1740 level. On the flip side, breaking 200-period SMA (1.1650) will bring 20-period SMA (1.1630) in view before the 1.1600 level.

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