The EURUSD has reclaimed its bullish momentum since Monday. The bulls are battling to maintain their parity level after falling to a twenty-year low of $0.991 last Friday. The hawkish stance of Powell during the Jackson Hole economic summit last Friday has imbalanced the Euro while strengthening the US dollar. The market is gradually absorbing the shock from this session, with the bulls returning to defend the euro again. Hence, we find EURUSD steadily retracing its fall since Monday to reclaim its parity again during the Asian session today.
Investors are eagerly awaiting the reports from the German Prelim CPI and the US NFP report this week to determine the fate of this pair. The outcome of these two data will be the major factors to cause volatility for EURUSD this week.
The German prelim Consumer Price Index (CPI) is an important economic data point that measures the changes in the prices of goods and services offered to consumers. The results from this data are significant to investors as it provides reliable information for measuring the inflation rate for the euro. Higher readings from the CPI often attracted the bulls in the expectation of an aggressive interest rate hike for the Euro during the next ECB meeting. In contrast, the lower reading from the Prelim CPI points to a reduction in the inflation rate. A reduction in the inflation rate does not often incite the bulls who are only interested in a higher interest rate.
Aside from this, the next critical economic data point anxiously awaited by the bulls this week is the US Non-Farm Payroll report (NFP). The readings from this data will determine the strength of the US dollar against the Euro and every other currency pair in the market today. The NFP report gives an insight into the state of the US labour market. It measures the unemployment rate and provides insight into the progress made in job creation.
A reduction in the unemployment rate speaks well of the US economy and often strengthens the US dollar in return. This will also convince the Fed that the labour market can withstand aggressive interest rate hikes during their next session.
On the contrary, an increase in the US unemployment rate discourages investors and weakens the US dollar. The EURUSD frequently benefited from all instances of US dollar weakness.
How will the German CPI affect EURUSD today?
The German CPI report provides reliable information on the inflation rate. A higher inflation rate, as we know, excites the bulls and pushes them to invest more in the currency in the hope that the interest rate will be hiked. This means we can expect a more bullish trend for EURUSD should the report come higher. A lower inflation rate could cause the monetary policy committee to slow down on hiking the interest rate. This disperses the bulls and could cause more downside for EURUSD. The forecast for this data 0.3% is, while the previous record was $0.9%.
Factors that affect the performance of EURUSD today
Aside from these two significant factors, other related economic data also affected the performance of EURUSD today.
We have the Spanish Flash CPI in the Eurozone, which will be expected to reveal the Spanish inflation rate.
Next is the Italian 10-year Bond Auction, which measures the years from when the 10 year bond was sold by the government. The outcome of the bond often attracts more investors, especially when positive. This weakens the Euro in return.
We also have two additional factors in the US zone: the CB Consumer Confidence and the JOLTS Jobs Opening.
The Conference Board (CB) Consumer Confidence measures the present level of consumers' confidence in the US economy, expressed through their spending. Higher consumer confidence in the economy will strengthen the US dollar. This can trigger a downward trend for EURUSD and vice versa.
The JOLTS job openings measure the new jobs created in the past month that are yet to be occupied. This data excludes the farming industry.
EURUSD forecast ahead of German CPI
EURUSD is battling to stay above parity during the Asian session today. The pair was at $1.001 before being pushed back. This pair needs to stay above the parity level to attract more bulls.
Failure to hold above the parity level could cause more downsides with the target of $0.9961. A break below could lead to the previous low created last week at $0.9918.
Alternatively, should the pair hold above the parity level today, we can expect more upside with the target of $1.003.