ECB Bulletin and Powell Effect on the Horizon

Recent macroeconomic indicators, including private sector PMIs, continue to reinforce bets on a recession in the euro area. However, concerns about rising inflation may force the European Central Bank to keep interest rates high for longer. A higher interest rate environment for a longer period would impact borrowing costs and disposable income.

It is worth noting that the downward trend in disposable income would affect private consumption and the eurozone economy. Private consumption contributes more than 50% to the eurozone economy. However, a weaker outlook on consumer spending should ease inflationary pressure from demand and the need for a higher path for interest rates for a longer period.

European Central Bank President Christine Lagarde and Chief Economist Philip Lane are scheduled to speak on Thursday. Cues to the economy, inflation and interest rates will influence buyer appetite for the EUR/USD pair.

On Wednesday, Philip Lane, chief economist at the European Central Bank, raised concerns about inflation. Lane’s views point to the need for a higher path for interest rates for a longer period.

Fed Chairman Powell and the US labor market in focus

On Thursday, initial jobless claims will gain investors’ attention. Recent labor market reports have fueled bets on the Fed ending its interest rate hike cycle. A rise in jobless claims would be in line with sentiment towards the path of the Fed’s interest rate.

Economists expect initial jobless claims to rise from 217,000 to 218,000 on the weekend ending November 4.

A weak labor market environment would impact wage growth and consumer sentiment. Weak wage growth could lead to a downward trend in disposable income, affecting consumer spending. A decline in consumer spending may mitigate demand-driven inflation and the need for a tighter interest rate path by the Fed.

Beyond the numbers, Federal Reserve Chairman Jerome Powell is scheduled to speak on Thursday. Views on recent labor market reports and the potential impact on the Fed’s interest rate intentions need to be considered.

Short term forecast:

Fed and ECB speeches will continue to determine the short-term trends of EUR/USD. However, a hawkish Fed could put pressure on EUR/USD, considering the macroeconomic backdrop in the Eurozone.

EUR/USD price movement

Daily chart

The EUR/USD pair remained above the 50-day moving average while remaining below the 200-day moving average, sending price signals that are bullish in the near term but bearish in the long term.

A breakout of the EUR/USD pair above the 200-day moving average would give the bulls an opportunity to push towards the $1.07838 resistance level.

The ECB’s economic bulletin and central bank speeches will be the focal points on Thursday.

However, a decline through the 50-day EMA and the $1.06342 support level would bring a level below $1.06 into view.

The daily 14-period RSI at 58.94 indicates EUR/USD moving to the $1.07838 resistance level before entering the overbought zone.