EUR/USD Forecast: German Producer Prices and Central Bank Chatter in Focus

Highlights

• The EUR/USD gained 0.43% on Thursday, ending the session at $1.05823.
• Dovish comments from Fed Chair Powell fueled a EUR/USD rise to a Thursday high of $1.06164 before easing back.
• On Friday, German producer prices, euro area car registrations, and central bank commentary will draw investor interest.

Thursday Overview

On Thursday, the EUR/USD gained 0.43%. Reversing a 0.38% loss from Wednesday, the EUR/USD ended the day at $1.05823. The EUR/USD fell to a low of $1.0581 before rising to a high of $1.06164.

German Producer Prices and the ECB in Focus

The German economy is in the spotlight again on Friday. German producer prices will give investors a snapshot of the demand environment across the manufacturing sector. If producer prices unexpectedly decline, the numbers could further contribute to the pessimistic outlook for the German economy.

Economists forecast producer prices to increase 0.4% in September (Aug: +0.3%). However, economists predict producer prices to decline by 14.2% year-over-year (Aug: -12.6%).

Euro area car registration numbers for September also warrant consideration. A slide in car registrations would add to the negative outlook for the euro area economy.

Beyond the numbers, ECB commentary may move the dial. ECB Executive Board member Elizabeth McCaul is on the calendar to speak on Friday. Comments favoring a higher-for-longer rate path would support buyer demand.

However, news updates on the Middle East conflict will continue to impact the global financial markets. An escalation in the conflict would fuel demand for the US dollar.

FOMC Members to Conclude a Busy Week for the US Dollar

The Fed pivot away from a rate hike is almost complete. On Thursday, Fed Chair Powell poured ice water on expectations of a Fed interest rate hike. However, Powell left the door ajar for more rate hikes, leaving the onus on FOMC members to close the door.

FOMC members Patrick Harker and Loretta Mester are on the calendar to speak on Friday. Dovish comments on interest rate plans will likely test the buyer appetite for the US dollar.

In recent speeches, Patrick Harker leaned in favor of holding rates unchanged. Loretta Mester must deliver a convincing case to hike rates to impact the EUR/USD.

Short-Term Forecast:

Near-term EUR/USD trends hinge on market sentiment toward the euro area economy and central bank guidance. With the US economy in better shape, the EUR/USD may face strong resistance at $1.06. The Middle East conflict is another consideration.

EUR/USD Price Action

Daily Chart

The EUR/USD sat below the 50-day and 200-day EMAs, affirming bearish price signals.

A EUR/USD break above the $1.06342 resistance level would give the bulls a run at the 50-day EMA.

Better-than-expected German producer prices and dovish Fed comments would support a positive session.

However, an escalation in the Middle East conflict or a slide in German producer prices would impact the buyer appetite for the EUR/USD.

A EUR/USD drop below $1.05500 would bring the $1.05230 support level into play.

The 14-period Daily RSI, 47.20, suggests a EUR/USD break below the $1.05230 support level before entering oversold territory.

4-Hour Chart

The EUR/USD holds above the 50-day EMA while hovering below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

A EUR/USD return to $1.06 would support a move to the 200-day EMA and $1.06342 resistance level. However, the EUR/USD may face selling pressure at the $1.06342 resistance level. The 200-day EMA is confluent with the resistance level,

A break below the 50-day EMA would bring the $1.05230 support level into play.

The 14-period RSI on the 4-hour chart, 54.86, suggests a EUR/USD move to the 200-day EMA before entering overbought territory.