Euro Forecast: EUR/USD Recovery Persists Ahead of Euro Area CPI Report

Euro Outlook: EUR/USD

EUR/USD extends the advance from the start of the week as the Euro Area Gross Domestic Product (GDP) report shows a larger-than-expected rise in the growth rate, and the exchange rate may further retrace the decline from the start of the month as the Relative Strength Index (RSI) continues to recover from oversold territory.

Euro Forecast: EUR/USD Recovery Persists Ahead of Euro Area CPI Report

EUR/USD trades to a fresh weekly high (1.0871) as the Euro Area expands 0.4% in the third quarter of 2024 versus forecasts for a 0.2% print, and little signs of an imminent recession may encourage the European Central Bank (ECB) to the keep interest rates on hold following the 25bp rate cut at the October meeting.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

In turn, the ECB may continue to unwind its restrictive policy at a gradual pace as the central bank is ‘determined to ensure that inflation returns to our two per cent medium-term target in a timely manner,’ but the update to the Euro Area Consumer Price Index (CPI) may put pressure on the central bank to achieve a neutral policy sooner rather than later as the report is anticipated to show another slowdown in core inflation.

Euro Economic Calendar

Even though the headline CPI is expected to increase to 1.9% in October from 1.7% per annum the month prior, the core reading is seen narrowing to 2.6% from 2.7% during the same period.

With that said, signs of easing price growth may curb the recent recovery in EUR/USD as it fuels speculation for another rate cut at the next ECB meeting on December 12, but an uptick in both the headline and core CPI may generate a bullish reaction in the Euro as it raises the central bank’s scope to further combat inflation.

EUR/USD Chart – Daily

Chart Prepared by David Song, Strategist; EUR/USD on TradingView

EUR/USD rises after defending the monthly low (1.0761) earlier this week, and the Relative Strength Index (RSI) may continue to show the bearish momentum abating as it moves away from oversold territory.
A break/close above the 1.0860 (50% Fibonacci retracement) and 1.0880 (23.6% Fibonacci extension) region brings the 1.0940 (50% Fibonacci retracement) to 1.0960 (61.8% Fibonacci retracement) zone back on the radar.
However, failure to break/close above the 1.0860 (50% Fibonacci retracement) and 1.0880 (23.6% Fibonacci extension) region may push EUR/USD back towards the monthly low (1.0761), with a close below 1.0770 (38.2% Fibonacci retracement) open up the June low (1.0666).

Additional Market Outlooks

Monetary vs Fiscal Policy: Implications for FX Markets

US Personal Consumption Expenditure (PCE) Report Preview (SEP 2024)

British Pound Outlook: GBP/USD Recovery Emerges Ahead of UK Budget

USD/CAD Eyes August High as RSI Holds in Overbought Territory

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.