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Tuesday Overview

The EUR/USD fell by 0.16% on Tuesday. After a 0.07% loss on Monday, the EUR/USD ended the day at $1.06997. The EUR/USD reached a high of $1.07221 before falling to a low of $1.06640.

On Wednesday, finalized German inflation figures for October will garner investor interest. Inflation remains a focal point for the ECB despite softer inflationary pressures. Upward revisions to consumer price inflation could force the ECB to delay considering an interest rate cut.

A higher interest rate environment impacts borrowing costs and affects disposable income. A downward trend in disposable income would ease consumption and demand-driven inflationary pressures. A negative German consumer spending outlook would fuel recessionary fears. German private consumption contributes over 50% to the German economy.

Later in the European morning session, Eurozone retail sales figures will influence the EUR/USD. Economists forecast retail sales to decline by 0.2% in September, after a 1.2% fall in August. A larger-than-expected fall would fuel recessionary fears. However, a further decline in spending could ease demand-driven inflationary pressures and the need for a higher-for-longer interest rate path.

Beyond the numbers, ECB Chief Economist Philip Lane and Executive Board member Andrea Enria are on the calendar to speak. Forward guidance from the ECB Chief Economist would have more influence on investors.

Fed Chair Powell in the Spotlight

On Wednesday, Fed Chair Powell will be in the spotlight. Recent US labor market stats signaled a softer labor market environment. The Fed Chair could indicate whether labor market conditions weakened enough for the Fed to end its rate hike cycle.

Fed Vice Chair John Williams, as well as FOMC voting members Michael Barr and Lisa Cook, will also deliver speeches. Diverging views on interest rates could fuel speculation about the Fed ending its rate hike cycle.

Short-Term Forecast:

Near-term trends hinge on central bank speeches. FOMC member-fueled bets on the Fed ending its rate hike cycle would leave the EUR/USD in the hands of economic data. A deterioration in the Eurozone macroeconomic environment may force the ECB to cut rates before the Fed.

EUR/USD Price Action

Daily Chart

The EUR/USD held above the 50-day EMA while remaining below the 200-day EMA, affirming bullish near-term but bearish longer-term price signals.

A EUR/USD move through the 200-day EMA would support a run at the $1.07838 resistance level.

Euro area economic indicators and central bank speeches remain the focal points on Wednesday.

However, a break below the 50-day EMA and the $1.06342 support level would give the bears a run at sub-$1.06.

The 14-period Daily RSI, 57.33, indicates a EUR/USD move through the 200-day EMA to the $1.07838 resistance level before entering overbought territory.

EURUSD 081123 Daily Chart

4-Hour Chart

The EUR/USD holds above the 50-day and 200-day EMAs, reaffirming bullish price signals.

A EUR/USD return to $1.07 would support a move to the $1.07838 resistance level at $1.08.

However, a fall through the 50-day EMA would give the bears a run at the $1.06342 support level and the 200-day EMA.

The 14-period RSI on the 4-hour chart, 54.75, indicates a EUR/USD move to the $1.07838 resistance level before entering overbought territory.

EURUSD 081123 4 Hourly Chart

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