EURUSD Probing Resistance Levels Ahead of US Data

The EURUSD exchange rate is heading for resistance at 1.06, with US economic data due on Friday.

The 1.06 level was considerable support for the pair back in June, and it was surrendered a year later.

EURUSD Weekly Chart

EURUSD Weekly Chart

The United States economy will see the release of PPI pricing data and Michigan consumer sentiment.

The PPI figure is expected to come in at 0.2%, which would be the same as the previous month. The Michigan consumer data is also set to be close to last month’s figure of 56.8.

Traders are looking ahead to next week’s meetings of the Federal Reserve and the European Central Bank. Both central banks are expected to increase interest rates to tackle inflation, which is still hurting their respective economies.

The ECB is expected to copy the Fed with a hike of 50 basis points. Still, a hawkish group within Europe’s leading central bank wants a third successive increase of 75 basis points, despite a recent drop in Eurozone inflation for the first time in 18 months.

The market sentiment is mixed as investors need clarification about whether to be buoyed by strength in the United States economy with a tight labour market and stronger demand in the services sector. Others are cautious about expectations for higher interest rates despite slowing inflation.

The strong demand for staffing hints that inflationary pressures are here to stay as demand for labour adds to upward pressure on salaries. That can add to the money in households and, ultimately, some further inflationary pressure.

Federal Reserve policymakers are pushing for a higher interest rate peak rather than a continuation of the current pace to tackle inflation pressures. Expectations for a higher terminal rate have added to recession fears. Bank of America CEO Brian Moynihan told investors at a financial conference that the United States economy will show “negative growth” in the first half of 2023. Still, the slowdown would be “mild.”

EURUSD is likely to hit the 1.06 resistance level, but the central bank meetings next week will determine the following path.

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