EUR/USD Bullish Potential Increased After Breaking Above the 1.1670 Level

EUR/USD Current price: 1.1681

• Inflation in the Union is more problematic than policymakers would like to acknowledge.
• US Gross Domestic Product was up by 2% in the third quarter, missing the market’s expectations.
• EUR/USD bullish potential increased after breaking above the 1.1670 level.

The EUR/USD pair finally left its range, breaking higher and trading as high as 1.1691, its highest for October. The dollar entered a sell-off spiral after Wall Street’s opening, as indexes reacted to first-tier news. Ahead of the opening, the US published the preliminary estimate of its Q3 Gross Domestic Product, which printed at 2.0% QoQ, below the 2.7% expected and contracting from the previous 6.7%, somehow suggesting slowing economic growth and a not that tight monetary policy in the near future.

The country also released  Personal Consumption Expenditure Prices for the same period, which jumped to.5.3%, above the 4% expected and hinting at persistent inflationary pressures. Finally, the country unveiled Initial Jobless Claims for the week ended October 22, which contracted to 281K, beating the 290K expected.

As for the ECB, the Central Bank left its monetary policy unchanged as anticipated. The statement was pretty much a copy of the previous meeting, with policymakers pledging to maintain financial support for as long as needed and repeating that inflation will soon recede from the current 13-year high.

Among other things, President Christine Lagarde said that the PEPP would likely end on March 2020, as initially planned, but added that no rate hikes are to be expected throughout 2022. “What comes next, we will discuss in December,” she said. About inflation, she blamed it on higher energy prices and supply chain issues, but those able to read between lines noted that she and her colleges are more concerned than what they showed. That’s the main reason EUR/USD approached the 1.1700 figure.

On Friday, Germany and the EU will publish the preliminary estimates of their Q3 Gross Domestic Products, foreseen at 2.7% QoQ and 2% QoQ respectively. The US will release September Personal Spending figures, which include core PCE inflation, the Federal Reserve’s favorite inflation measure.

EUR/USD short-term technical outlook

The EUR/USD pair is comfortably trading above the 38.2% retracement of its 1.1908/1.1523 slide at 1.1670. The latter has capped advances ever since the month started, with the current breakout hinting at a steeper advance in the near term.

Technical readings in the daily chart support a continued advance as the pair has moved far above a now mildly bullish 20 SMA, while technical indicators head firmly higher within positive levels. However, the 100 SMA maintains its bearish slope, a handful of pips above the 61.8% retracement of the mentioned decline at 1.1760.

For the near term, and according to the 4-hour chart, the risk is skewed to the upside. Technical indicators consolidate gains near overbought readings, as the pair finally surpassed all of its moving averages for the first time in over a month. The pair could approach the 1.1800 figure ahead of the weekly close before meeting relevant selling interests.

Support levels: 1.1670 1.1615 1.1570  

Resistance levels: 1.1715 1.1750 1.1790

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