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The Euro is trading lower on Wednesday after annual Final consumer inflation came in slightly lower than expected at 9.9%. Traders were looking for a reading of 10.0%. Final Core CPI remained unchanged at 4.8%. Despite the dip in CPI, economist still predict the European Central Bank (ECB) will lift its benchmark interest rate next week.
The ECB meets on Thursday, Oct 27, and is widely expected to lift its key interest rates by 75 basis points. This would match its hike in September, after it started its tightening path with a 50 basis point hike in July.
At 11:43 GMT, the EUR/USD is trading .9770, down 0.0090 or -0.91%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $90.96, up $0.23 or +0.25%.
The Euro is also being pressured by a stronger U.S. Dollar, which is getting a lift from rising government debt yields. Treasury yields rose across the board on Wednesday as concerns over a recession spread among investors.
Concerns about a recession have been growing louder among investors as the Federal Reserve continues to follow a hawkish path lined with interest rate hikes. Speaking at an event on Tuesday, Minneapolis Fed President Neel Kashkari said he saw no reason not to push the central bank’s benchmark funds rate above 4.75% in order to tackle inflation.
Daily Swing Chart Technical Forecast
The main trend is down according to the daily swing chart. A trade through .9999 will change the main trend to up. A move through .9632 will signal a resumption of the downtrend.
The short-term range is .9537 to .9999. The EUR/USD is currently testing its retracement zone at .9768 to .9714.
On the upside, a 50% resistance level at .9968 stopped the recent four day rally at .9876 on Tuesday.
Daily Swing Chart Technical Forecast
Trader reaction to the short-term 50% level at .9768 is likely to determine the direction of the EUR/USD on Wednesday.
Bearish Scenario
A sustained move under .9768 will indicate the presence of sellers. If this move gains any traction then look for the selling to continue into the short-term Fibonacci level at .9714. If this level fails then look for the selling to possibly extend into the next main bottom at .9632.
Bullish Scenario
A sustained move over .9768 will signal the presence of buyers. This could trigger an intraday short-covering rally into .9818. Sellers are likely to come in on the first test of this level, but if it fails, we could see a retest of the resistance cluster at .9868 to .9876.
Side Notes
Also today, EUR/USD traders will be looking for further insights into the state of the U.S. economy and the impact economic developments are having on consumers.
Today’s Fed speakers and housing starts and building permits data could give them the insight they are seeking.
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