EURUSD has soared as the market recovers from a big bullish run in the US dollar.
The single currency has jumped to hit resistance at the 1.04 level, and traders should watch that this week.
EURUSD – Weekly Chart
The first data for the pair comes on Tuesday, with the second estimate for Q3 GDP in the eurozone. That is joined by ZEW sentiment figures for the German economy.
Traders should look to play a breakout higher in the euro with support down to as low as 1.02. The following data point to watch will be Thursday’s core inflation rate for the eurozone, which is expected to be 5% after last month’s 4.8%.
European Central Bank Chief Christine Lagarde signalled that more can be done if inflation remains stuck. That could be important for the euro as the Federal Reserve hints at a slower pace of rate hikes.
“If we were to see, for example, inflation becoming more persistent and expectations being at risk of de-anchoring, we could not wait until the full impact of the policy measures materialises,” Lagarde said.
“We would need to take additional actions until we are more confident that inflation will return to target in a timely manner,” she added.
Speaking in Spain, her deputy Luis de Guindos also said the ECB had to “remain focused on reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations.”
He and Lagarde said governments should stick to “temporary” and “targeted” support for households hit by the current inflation crisis.
Interest rates in the eurozone jumped to 2% at the last ECB meeting, with a 0.75% increase.
Meanwhile, the European Commission predicted the German economy would drop next year. According to its fall forecast, the German gross domestic product will grow by another 1.6 percent this year. Still, it will then decline by 0.6 percent next year.
Germany is the only eurozone country that forecast negative growth for the year. The key reason for Germany’s weak economic performance is higher energy prices.
ZEW economic sentiment is expected to come at -50 tomorrow for the German economy. That is better than last month’s -59.2 reading but is still weak.
