Forecast for the EUR/USD: A loose US dollar and an impending Fed reversal

Market Analytics and Technical Considerations

After dismal US growth-related data, there was intense selling push on the US dollar.

The FOMC Meeting Minutes give some indication that rate increases in December will be more gradual.

In the near future, the EUR/USD could increase its advances to 1.0480 and beyond.

The EUR/USD pair soared to an intraday top of 1.0383 early in the American session, dealing yet another blow to the US Dollar. As global stock markets rose, the Greenback originally declined due to a reduction in perception of risk. Up to the publication of depressing US growth-related numbers, which ignited a sharper sell-off, the decline was contained. After the FOMC Meeting Minutes were made public, the EUR/USD continued to rise and made an attempt to reach 1.0400.

Initial Jobless Claims for the week ending November 18 rose to 240K, and October Durable Goods Orders grew by 1% for the month. The November Michigan Consumer Sentiment Index also increased from 54.7 to 56.8, above forecasts. S&P Global PMIs had a negative effect on the US Dollar. According to the November initial projections, the US manufacturing index decreased to 47.6, a new 30-month trough and under the predicted 50. The indicator for services activity in the private sector came in at 46.1, its lowest level in three months, which was lower than anticipated.

The macroeconomic data from across the pond was slightly more positive. The manufacturing index increased to 46.7, and the German S&P Global Services PMI registered at 46.4. The services PMI for the Eurozone came in at 48.6, mirroring the level from October, while manufacturing production increased to 47.3 from 46.4 the previous month. Even though business confidence remained depressing by historical standards, the official report showed that price pressures decreased due to weakening demand and loosening supply limitations.

The FOMC Meeting Minutes revealed that the majority of participants were in agreement that a slower rate of interest rate increases would be warranted shortly, despite the risk to the inflation outlook continuing to be biased to the upside. They also think the monetary policy is getting close to being “adequately restricting.” In an instant response to the news, the US Dollar dropped even lower while US indexes increased in speed.

The November IFO Business Climate survey, expected to increase from 84.3 to 85 on Thursday, will be released in Germany. The Monetary Policy Meeting Accounts will be released by the European Central Bank, although the US will not provide macroeconomic statistics due to the Thanksgiving holiday.

Short-term technical outlook for the EUR/USD

The EUR/USD pair trades above 1.0305, the daily rally’s 23.6% retracement level, which is marked between 0.9729 and 1.0480, in expectation of a likely retest of the range’s upper end. The pair touched the 200 SMA a few occasions last week and is now approaching it, according to the daily chart. Since June 2021, the EUR/USD has been trading under the indicator; therefore, a convincing break over it would be promising for bulls, who would then be reinforced by an extension over 1.0480. The 20 SMA is still above a flat 200 SMA despite having slightly lost some of its bullish momentum, according to the same chart. Last but not least, technical indicators began to strengthen, moving steadily higher near overbought levels and in accordance with another step north.

The longer moving averages continue to have bullish slopes significantly below the indicated Fibonacci support level at 1.0305, while the 20 SMA is flat a few pip beneath it on the 4-hour chart. Technical indicators are still in positive territory with unequal upward strength in the interim. The RSI has continued its ascent and is currently hovering around 65, bolstering the case for a bullish continuation in the near term even though the momentum is stabilizing.

Support levels: 1.0245, 1.0350, and 1.0300.

Levels of resistance: 1.0395 1.0440 1.0480

Simple Moving Averages – Daily