- EUR/USD erases Thursday’s gains and loses 0.53% on Friday.
- US consumer sentiment improved, although retail sales slowed.
- EUR/USD Price Forecast: If it breaks above the 20-day EMA, the pair could challenge the 0.9800 level; otherwise, it could test the year’s low.
EUR/USD loses its grip around the 20-day EMA and slopes lower as the North American session progresses, amid a firm US dollar, following the release of a US inflation report on Thursday, while mixed US economic data and hawkish Fed comments buoyed the dollar. At the time of this writing, the EUR/USD pair is trading at 0.9724.
On Friday, EUR/USD opened around daily highs at 0.9808 above the 20-day EMA, but buyers, unable to maintain strength, paved the way for further losses.
EUR/USD Falls Despite Weak US Retail Sales; consumer sentiment improved
The US Department of Commerce reported that Retail Sales stagnated in September, at 0% MoM, disappointing estimates of 0.2%, while on a YoY basis, it slowed further, from 9.15% to 8.41% , reflecting the Fed’s monetary policy shock.
Later, the University of Michigan Consumer Sentiment improved steadily in October as the index jumped to 59.8 from 58.6., although inflation expectations were revised higher, with a 5.1% price rise forecast from the 4.7%.
The data barely moved EUR/USD, although the Fed’s remarks boosted the dollar. The Fed’s George, Daly and Cook reiterated that inflation is too high and that monetary policy needs to be tight for longer to contain inflation. Daly added that he expects the Federal Funds Rate (FFR) to peak at between 4.50% and 5%, while Lisa Cook said the Fed should avoid a “stop” approach. and boot” on the rise in interest rates.
Furthermore, the International Monetary Fund (IMF) predicted recessions in Italy and Germany in 2023. So if it seemed bleaker, the Eurozone scenario now looks even worse. Eurozone data released in the European session saw Spain’s inflation rise less than estimated, while French data followed suit.
Some ECB speakers crossed wires. The ECB’s Vasle said that 75 basis points in October and December could be appropriate, while the ECB’s Centeno added that the ECB needs to be “aggressive” on inflation, while suggesting that QT discussions should be carried over to the following year.
EUR/USD Price Forecast
The daily chart of the EUR/USD illustrates that the majors stalled at the 20-day EMA, which aggravated the decline towards the 0.9720 area. Key support lies at 0.9700, which, once breached, could open the door for a retest of the year low at 0.9535. On the other hand, if EUR/USD retraces the 0.9786 zone, the pair could challenge the 0.9800 zone.
Source: Fx Street
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