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EUR/USD Forecast: Growth and inflation under the spotlight

The EUR/USD pair trades marginally higher on a daily basis and is heading into Wall Street’s close at around 1.1250. It posted a lower low for the year at 1.1225, as demand for the greenback persists in a risk-averse environment.  

The shared currency advanced following the release of the November flash Markit PMIs, which came in better than anticipated. The German manufacturing index printed at 57.6, while the services one improved to 53.2. For the whole EU, the Manufacturing PMI came in at 58.6, while the Services Index resulted in 56.6. However, the accompanying report noted that the upturn was accompanied by a marked increase in inflationary pressures during the month, with costs and selling prices rising at record rates.

On the other hand, US figures were mixed, as the Manufacturing PMI improved by more than anticipated to 59.1, while the Services PMI unexpectedly contracted to 57. On a positive note, the November Richmond Fed Manufacturing Index printed at 11, better than the 5 expected.

Wednesday will see quite a busy macroeconomic calendar, as the US celebrates Thanksgiving on Thursday. The country will publish October Durable Goods Orders, the second estimate of the Q3 Gross Domestic Product, the latest FOMC Meeting Minutes and October core PCE inflation foreseen at 4.1% from 3.6% previously. PCE inflation is the US Federal Reserve favourite measure of prices pressure.  Earlier in the day, Germany will release the November IFO survey on Business Climate.

EUR/USD short-term technical outlook
From a technical point of view, the EUR/USD pair has room to extend its decline. The daily chart shows that technical indicators have turned flat within oversold levels without signalling an upcoming recovery. At the same time, the pair has extended its decline well below its moving averages, with the 20 SMA heading firmly lower below the longer ones and currently at around 1.1470.

The near-term picture shows that the intraday advance could be seen as a mere correction. The 20-SMA maintains a firmly bearish slope, providing intraday resistance, a handful of pips above the daily high. Meanwhile, technical indicators corrected oversold conditions, with the RSI now flat at around 36 and the Momentum advancing below its midline. The pair needs to advance and stabilize above the 1.1320 level to shrug off the bearish tone, at least in the near term.

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