EUR/USD: important US data on tap, ECB speakers.

EUR/USD could see volatility on Thursday with US data and ECB speakers in the line up.
US factory gate prices and Retails Sales could tone the debate on when the Fed cuts interest rates.
In Europe, speakers from the ECB may shed light on when the ECB considers its own rate cut.

EUR/USD continues trading in the mid 1.0900s after pulling back from a peak at 1.0981 achieved last week. With data releases and events affecting both sides of the EUR/USD pair on Thursday, a cursory glance at the proverbial “crystal ball” suggests some volatility is probable.

In the US, factory gate inflation and Retail Sales data could tone expectations of when the Federal Reserve (Fed) will start cutting interest rates – a key driver for the US Dollar (USD).

In Europe, meanwhile, a string of rate-setters from the European Central Bank (ECB) are scheduled to speak with their comments likely to shed light on when the central bank will decide to start cutting its interest rates – a key driver for the Euro (EUR).

The takeaway is that if inflation is seen as stubborn, interest rates will stay high, supporting the currency in question.

EUR/USD Daily digest market movers: US data and Euro-speak

US core factory gate prices, Producer Prices ex Food and Energy (Core PPI), an important inflation metric, is scheduled for release at 12:30 GMT, with economists expecting a drop to 1.9% YoY registered in February from 2.0% in January.

On a month-on-month basis, Core PPI is forecast to show a 0.2% rise versus the 0.5% advance seen in the previous month.

The headline Producer Price Index (PPI) is forecast to show a 1.1% YoY gain versus 0.9% in January, and a 0.3% gain MoM, the same as previous.

Since the PPI informs base costs that feed into the Consumer Price Index (CPI), the data is an important leading indicator for CPI inflation. If retailers have to pay more for their goods wholesale, they will usually pass on the increase to consumers.

US Retail Sales, also out at 12:30 GMT, are forecast to rebound in February, registering a 0.8% rise against the 0.8% decline in January. Higher-than-expected sales tend to spur inflation with implications for interest rate policy and the USD.

ECB speakers to shed light on whether interest rates will fall in April or June

Dovish talk from ECB Governing Council (GC) big-hitter Francois Villeroy de Galhau on Monday suggested he was leaning in favor of April for a first interest-rate cut by the Frankfurt-based bank.

On Wednesday, Bank of Austria Governor and ECB Governing Council member Robert Holzmann, however, said he thought the bank was more likely to cut in June. The President of the ECB, Christine Lagarde, also said June was the time the ECB would review its policy on rates.

Early Thursday ECB Governing Council member Yannis Stournaras backed the case for an early rate cut. Stournaras added that he doesn’t buy the argument that the ECB cannot cut rates before the Fed and that four rate cuts in 2024 seem reasonable.

A list of speakers from the ECB on Thursday may shed further light on the debate:

11:00 GMT sees the member of the ECB’s Executive Board, Isabel Schnabel, talk.
At 12:00 ECB Governing Council member Klaas Knot holds a press conference, according to Forexlive.com.
Bank of Spain Governor and ECB Governing Council member Pablo Hernandez de Cos is to speak at an event in Madrid at 17:00, according to Forexlive.com.
Vice-President of the ECB Luis de Guindos is up at 18:00 GMT.

If more members appear to gravitate to June, which is the base case, it could have a slightly positive impact on the Euro and EUR/USD. If the De Galhau camp gains momentum, EUR/USD could weaken.

Technical Analysis: EUR/USD continues correction lower

EUR/USD is still mid-pullback after peaking at the 1.0981 March 8 high.

The correction lacks momentum and Wednesday’s up day adds evidence suggesting the pair is more likely pulling back within a dominant short-term uptrend rather than reversing that uptrend. As things stand, it’s likely to find a floor and resume its upside eventually.

Euro vs US Dollar: Daily chart

It is still possible the correction could fall lower before it completes. One possible zone where price could eventually find support is between 1.0898 (February 2 high) and the top of the Measured Move’s A wave at 1.0888.

A break below 1.0867 would be more critical and add credence to the case for a trend reversal, with bears taking more control.

On the other hand, a move above 1.0981 would provide confirmation of a higher high and an extension of the uptrend.

After that, tough resistance is expected at the 1.1000 psychological level, which is likely to be the scene of a fierce battle between bulls and bears.

A decisive break above 1.1000, however, would open the gates to further gains towards the key resistance level at 1.1139, the December 2023 high.

By “decisive” it is meant a break characterized by a long green candle piercing clearly above the level and closing near its high, or three green bars in a row, breaching the level.

ECONOMIC INDICATOR

United States Producer Price Index ex Food & Energy (YoY)

The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and energy are excluded in order to capture an accurate calculation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).