EUR/USD climbs above 1.0650 after EU data
The daily chart of EUR/USD indicates a lack of clear bias, suggesting that the pair may continue to trade around the 20-day Simple Moving Average (SMA). However, a break above the 55-SMA, which is currently located at 1.0675, would suggest the potential for further gains.
On the 4-hour chart, the price is currently above key SMAs and consolidating above 1.0600. The technical indicators are slightly biased to the upside, although with weak conviction. Further gains are likely in the upcoming Asian session, particularly while the price remains above 1.0575.
The Euro faces a relevant resistance area around 1.0630, and a breakout above that level would open the doors to further gains, potentially towards 1.0670.
On the flip side, immediate support is seen at 1.0590, followed by the area between 1.0550 and 1.0560. A break below these levels would weaken the outlook, suggesting a test of 1.0520.
The EUR/USD climbed above 1.0600 during the American session, supported by a weaker US Dollar across the board ahead of the FOMC meeting and key jobs data. The Euro also received support from Eurozone economic data. The pair peaked at 1.0625, the highest level in six days.
The European Central Bank (ECB) would likely welcome the data from Germany. The economic contraction during the third quarter was milder than expected, with a decline of 0.1% quarter-on-quarter compared to the projected 0.3% contraction. Additionally, previous figures were revised higher, reversing the technical recession that occurred in Q4 2022/Q1 2023. According to preliminary data, annual inflation in October decreased from 4.5% in September to 3.8%, falling below the expected 4%. More German data, specifically Retail Sales, is scheduled to be released on Tuesday. Eurostat will also release the Eurozone Harmonized Index of Consumer Prices and GDP data.
The data supports the expectation that the ECB will maintain its current stance in the near future. The Federal Reserve (Fed) is also expected to keep rates unchanged as it starts its 2-day meeting on Tuesday. However, the strong economic performance allows for potential rate hikes if the FOMC desires, as the labor market remains tight and the annualized GDP growth recorded in Q3 was above 4%.
Key US data is due throughout the week, starting with the Employment Cost Index on Tuesday, followed by the ADP private employment report, and culminating with the Nonfarm Payrolls on Friday. These figures will have an impact on the momentum of the US Dollar, that weakened on Monday amid improved risk sentiment.