- Fed's Powell suggests keeping rates unchanged and waiting for more data.
- The US Dollar weakened, albeit modestly, following US data and Powell's remarks.
- The EUR/USD maintains a bullish bias in the short term.
The EUR/USD rose on Thursday and was heading towards its highest daily close in over a week, despite risk aversion in the market, boosted by a weaker US dollar. However, the pair failed to hold above the 1.0600 level, indicating that there are still obstacles ahead on the upside path.
Germany will report the September Producer Price Index (PPI) on Friday. The annual rate is expected to decline from -12.6% to -14.2%. The next key event will be the European Central Bank (ECB) meeting next week. Markets anticipate that key rates will remain unchanged for the first time since June of last year.
Economic data from the US released on Thursday came in mixed. Initial Jobless Claims dropped below 200,000; however, Continuing Claims rose to 1.734 million, reaching the highest level since July. Existing Home Sales dropped to 3.96 million, marking the lowest level in 13 years. The Philly Fed Manufacturing Index was set at -9 in October, lower than the market consensus of -6.6. These numbers did not favor the US Dollar. No key reports are scheduled for Friday.
Federal Reserve Chair Jerome Powell hinted his preference for the central bank to keep rates unchanged in the near term. He also emphasized that inflation remains a risk. This message aligns with recent discussions from the Fed, which have indicated a stance of maintaining steady rates if inflation continues to slow and the economy does not show further strengthening.
EUR/USD short-term technical outlook
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The EUR/USD has experienced a rise for the third time in the past four days and is above the 20-day Simple Moving Average (SMA). Technical indicators on the daily chart show some bullish signals, with the Relative Strength Index (RSI) moving higher and Momentum crossing above 100. If there is a daily close above 1.0640, it could clear the path for further gains. Conversely, if the pair falls below 1.0500, it could indicate further weakness ahead.
On the 4-hour chart, the pair is showing a bullish bias, and technical indicators favor also this view. Continued gains could be seen as long as the pair remains above 1.0555. A decline below that level would target the 1.0530 support, potentially signaling the end of the current upward move.
The key resistance level is observed at 1.0630, which is both a horizontal level and a downtrend line. This zone is currently limiting gains. If the pair consolidates above this level, it could potentially lead to further gains, with an initial target at 1.0675.
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