Oct 20 (Reuters) – EUR/USD struggled to hold gains Friday and traded slightly lower ahead of Europe’s close, but longs are not panicking and key risks next week could be the catalyst they need to overcome structural resistance near 1.0630/40.
Key economic data reports next week will give updates on the strength of the euro zone economy, which many investors believe is headed for recession — if not already in one.
German November GfK consumer sentiment and October Ifo will provide updates on the strength of the bloc’s largest economy while October HCOB PMIs will gauge the overall euro zone’s economic health.
Since many investors expect dismal economic growth, as-expected or upbeat results could shift the current bearish sentiment, potentially boosting euro zone yields, which would likely underpin the euro.
The ECB meeting next week could also drive the euro. Investors expect rates to remain unchanged and a repeat of rhetoric indicating rate hikes may resume. Should the ECB surprise investors with a more hawkish policy stance, the euro may get a boost.
Any bullish influences next week could help EUR/USD rally through the key 1.0630/40 zone, potentially triggering stop losses and facilitating a run toward the 200-DMA.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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