The ECB, the Fed, Economic Indicators, and Geopolitics in Focus

Friday Overview

On Friday, the EUR/USD declined by 0.20%. Following a 0.86% loss on Thursday, the EUR/USD ended the day at $1.05067. The EUR/USD rose to a high of $1.05585 before falling to a low of $1.04953.

German Wholesale Prices and ECB President Lagarde in Focus

German wholesale prices for September kickstart a tricky session for the EUR/USD. A sharp decline in wholesale prices would reflect a weaker demand environment. In a deteriorating demand environment, firms cut prices to win new contracts. Economists forecast wholesale prices to decline by 4.2% year-over-year vs. -2.7% in August.

Later in the Monday session, Eurozone trade data also warrants consideration. Economists predict the Eurozone trade surplus to widen from €6.5 billion to €12.5 billion in August. An increase in exports would suggest an improving demand environment. However, investors must also consider trade terms with key trading partners, including China and the US.

Beyond the numbers, ECB President Lagarde and Executive Board members Andrea Enria and Anneli Tuominen are on the calendar to speak. Forward guidance on the economic outlook, inflation, and interest rates would move the dial.

NY Empire State Manufacturing Index and the Fed in Focus

The NY Empire State Manufacturing Index numbers for October will garner investor interest. While the US manufacturing sector contributes less than 25% to US GDP, investors will likely react to a slump in sector activity. Cracks in the US economy could reignite fears of a hard landing.

After the recent US consumer price inflation numbers, Fed speeches need consideration. FOMC member Patrick Harker is on the economic calendar to speak. On Friday, Harker favored leaving rates unchanged. A pivot to a hawkish policy stance would influence the buyer appetite for the US dollar.

Away from the economic calendar, updates on the Middle East conflict will influence market risk sentiment. The threat of other nations joining the conflict would fuel demand for the US dollar.

Short-Term Forecast:

Near-term EUR/USD trends hinge on central bank comments, economic indicators, and geopolitics. A sturdier US economy and hawkish Fed bets will continue to test buyer appetite for the EUR/USD.

EUR/USD Price Action

Daily Chart

The EUR/USD sat below the 50-day and 200-day EMAs, affirming bearish price signals.

A EUR/USD fall through the $1.05230 support level would bring the $1.03922 support level into view. Geopolitical tensions and hawkish Fed comments would affect the appetite for the EUR/USD.

However, hawkish ECB chatter and easing geopolitical tensions would support a move toward the $1.06342 resistance level.

The 14-period Daily RSI, 40.60, supports a EUR/USD fall to $1.04500 before entering oversold territory.

4-Hour Chart

The EUR/USD hovers below the 50-day and the 200-day EMAs, reaffirming bearish price signals. A EUR/USD fall through the $1.05230 support level would bring the $1.03922 support level into view.

However, a break above the 50-day EMA would support a move toward the $1.06342 resistance level.

The 14-period RSI on the 4-hour chart, 41.32, indicates a EUR/USD fall below $1.05 before entering oversold territory.