EURUSD Forecast
The EUR/USD price moved sideways on Monday morning as investors refocused on the upcoming US consumer confidence data and European Central Bank (ECB) decision. It was trading at 0.9845, which was slightly above last week’s low of 0.9698. This price is about 3.3% above the lowest level this year.
The main catalyst for the EUR to USD exchange rate will be the upcoming interest rate decision by the ECB that is scheduled on Thursday. Economists polled by Reuters expect that the ECB will hike interest rates by another 75 basis points. If this happens, it will be the second straight 0.75% rate increase.
The ECB, like other central banks, is fighting against the soaring inflation. Data published last week showed that the headline inflation rose by over10%, the highest level ever recorded. Many European countries are seeing double-digit inflation growth.
For example, countries like Estonia, Lithuania, and Latvia have seen their inflation surge to more than 20%. France, Malta, and Finland have the lowest inflation in Europe. Therefore, there the ECB will need to strike a balance as it fights against these prices.
The EUR/USD price will also react to the upcoming American consumer confidence data scheduled for Tuesday. Analysts expect the data by Conference Board is expected to show that confidence declined slightly in October as inflation remained stubbornly high.
Consumer confidence is an important data because of the important role that American consumers play in the economy. Consumer spending is the biggest constituent of the country’s GDP. The EUR/USD price will also react to the latest American GDP data scheduled on Thursday.
Still, all these numbers will likely have no impact on the next interest rate decision by the Federal Reserve. The bank is expected to hike interest rates by 75 basis points next month followed by 0.50% in December.
The four-hour chart shows that the EURUSD price is hovering at the 38.2% Fibonacci Retracement level. It has also moved slightly above the 50-day moving average while the Relative Strength Index (RSI) moved above the neutral level. The pair has also formed a symmetrical triangle pattern.
Therefore, with the triangle pattern nearing its confluence level, there is a likelihood that it will have a breakout this week. While it is too early to tell, the pair will likely have a bullish breakout to parity level. A drop below the support at 0.9800 will invalidate the bullish view. This view is in line with my previous EUR to USD forecast.
This post was last modified on Oct 24, 2022, 07:18 BST 07:18