- EUR/USD faces significant resistance to nearly 1.17 as traders weigh upcoming Fed decisions and key inflation data.
- Recent euro strength reflects expectations of a rate cut, but shifting economic signals could quickly revive US dollar momentum.
The euro initially tried to rally during the trading session on Thursday, but it turned around to show signs of hesitation. The 1.17 level above is significant resistance, and this area has caused some noise more than once. Overall, this is a market that continues to see a lot of questions asked about it.
The Wednesday session of next week will feature the FOMC interest rate decision and, more importantly, the press conference. The market expects an interest rate cut, so that's what has been reflected over the last two weeks. The last two weeks have been very pro-euro or, maybe more to the point, anti-US dollar. That being said, what happens if they don't get what they wanted out of the press conference from Jerome Powell, the same thing that happened in September?
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Economic Outlook and Dollar Dynamics
As far as the economic outlook is concerned, the US leading indicators look much more likely to show a stronger US next year in the first quarter, while Europe and many other places may not look as strong. In other words, it seems only a matter of time before we see US dollar strength yet again. That being said, if we broke above 1.18, I'd have to throw my hands up and say, okay, fine, the euro is going higher, but there's a lot of noise between here and there to still chew through.
Although recently we've seen a nice W pattern, the reality is this could all change very rapidly next week. Furthermore, the Friday session has the core PCE price index numbers. That is the Federal Reserve's favorite measure of inflation. If that comes in hotter than the 0.2% expected, that could make the US dollar strengthen quite rapidly as well.
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