Peter Smith
EUR/USD shows bullish momentum approaching 1.0850, but faces two-way risk with upcoming data from Germany and the U.S.
EUR/USD Approaches Key Levels as Euro Gains Momentum
EUR/USD has been gaining traction, rising toward 1.0850 during European trading hours on Wednesday. While technical indicators suggest building bullish momentum, the currency pair’s trajectory remains uncertain due to upcoming high-impact macroeconomic data releases from both Europe and the U.S.
Key economic indicators, including Germany's third-quarter Gross Domestic Product (GDP) and regional Consumer Price Index (CPI) figures, are highly anticipated by market participants. Current projections estimate a 0.3% annual contraction for Germany's GDP, and any sharper-than-expected decline could pressure the Euro further. Similarly, softer-than-anticipated inflation numbers could dampen bullish prospects, potentially limiting EUR/USD’s upward movement.
US Employment and GDP Data May Influence USD Strength
Later in the day, U.S. economic data releases will take the spotlight, with the ADP Employment Change report for October and the Bureau of Economic Analysis' first estimate of third-quarter GDP. Analysts expect a moderate increase of 115,000 jobs in the private sector, following September's 143,000 increase. The GDP data is projected to show 3% growth, suggesting robust economic performance.
Should both ADP and GDP figures fall short, the USD could face renewed selling pressure, which would favor EUR/USD gains. Conversely, if the data meets or surpasses expectations, it could strengthen the USD, limiting EUR/USD's upward momentum.
Mixed U.S. Data May Lead to Cautious Market Stance on EUR/USD
In the event of mixed economic data from the U.S., market participants may adopt a cautious approach, holding back on large trades. In this case, the opening sentiment on Wall Street could become a crucial factor influencing USD performance, adding another layer of complexity to EUR/USD's trajectory.
On a technical front, EUR/USD has recently broken out of a descending regression channel, with the 4-hour Relative Strength Index (RSI) moving up to 60, signaling a short-term bullish shift. The currency pair is approaching the 200-day Simple Moving Average (SMA) resistance at 1.0870, followed by additional resistance at the 1.0900 round level and the 100-day SMA near 1.0940.
Key support levels to watch are around 1.0810-1.0800, marked by the 20-period and 50-period SMAs, with further support at 1.0750 and a static level at 1.0700.
Peter Smith
