EURUSD has a big day of economic data ahead on Wednesday that could drive the near-term path ahead for the pair.
EURUSD – Weekly Chart
EURUSD has been on a slow correction in 2023, and the failure to get above 1.0736 last week has the pair looking at support levels. The first is at the 50 moving average at 1.058, with a stronger uptrend line near the 1.0400 level.
Last week’s comments from Fed governors Mester and Bullard suggested that the early Federal Reserve decision to slow the pace of interest rate hikes from 50 bps to 25 bps was not unanimous. Both had argued to continue the 50 bps hikes, and that division could show up in the latest minutes. The two policymakers were already more hawkish ahead of the bumper January payrolls data, a stubborn inflation number, and strong retail sales.
That has swung the pendulum back towards US dollar strength and could see the greenback continue to gain this week. The euro failed to get a boost from Tuesday’s stronger ZEW economic sentiment surveys, but markets are already pricing in a stronger eurozone recovery.
Traders will now pay attention to Wednesday’s German inflation numbers, with a higher reading expected. The inflation reading is expected to show a jump from 8.6% to 8.7% and should underline the ECB’s desire to continue with their own rate increases.
An IFO business climate reading is also released for the German economy, with an expected increase to 91.2 from 90.2.
These readings are unlikely to see much volatility ahead of the Fed minutes later in the day.
That will set the stage for Thursday’s US GDP reading for the second quarter, and there should be volatility in the EURUSD as we approach the weekend.
On current trends, traders may shrug off some positive economic indicators in Europe and look to the potential for a hawkish Fed and a robust economy. That could fuel a further rally in the US dollar into the weekend.
