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Euro poised to hit new highs

The EURUSD pair rose 0.03%, to 1.1597 on Thursday, October 14. Price action rallied to 1.1624 at the outset of the European session, amid a recoil in the 10-year UST yield and US dollar weakness across the board. Gold flirted with $1,800 for the first time since mid-September.

The euro saw its positions eroded following a speech by ECB President Christine Lagarde and a decline in the EURGBP cross pair. Lagarde said the central bank continues to view the upswing in inflation as largely being driven by temporary factors. Price pressures could become more persistent if supply bottlenecks last longer or wages rise more than is currently expected.

The dollar continued to correct following the release of US macro data, with the single currency retracing to 1.1584.

Weekly jobless claims for the prior week dropped by 36k to 293k, a pandemic-era low since March 2020. The producer price index (PPI) climbed 8.6% YoY, vs. the 8.7% median consensus.  Prices posted the largest increase since the Bureau of Labor Statistics began tracking the data in November 2010.

Today’s macro agenda (GMT+3)

  • 12:00 Eurozone: trade balance (August)
  • 15:30 US: retail sales (September), NY Empire State manufacturing index (October)
  • 17:00 US: University of Michigan consumer sentiment index (October)
  • 20:00 US: Baker Hughes weekly oil rig count

Current outlook

This morning looks like a repeat of yesterday’s trading session. Major currencies have been trading in positive territory, except for the yen. The kiwi and the loonie top the leaderboard.

Patrick Harker, President and CEO of the Federal Reserve Bank of Philadelphia, may have raised the demand for risk assets. Harker said he wouldn’t expect a rate hike until late 2022 or early 2023. He forecasts inflation at 4% this year, and a bit over 2% next year. He sees GDP growth of around 5.5% this year and 3.5% next year. Harker also favors tapering monthly purchases, like his colleagues.

Traders will now turn their attention stateside to retail sales, the University of Michigan consumer sentiment index from and US bond dynamics.

Technical analysis

The single currency recovered to 1.1606 in Asian trading. The EURBGP cross is still on the buy side, so there is a chance that the 1.1635 level (90-degee angle of the Gann fan) could be tested during the European session. The key US macro data has already come out. The key pair could head towards the 1.17 handle in line with the correction up until the Fed’s next meeting.

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