EUR/USD had a busy day yesterday as there was a lot of fundamental data to digest for the investors. For starters, we got the inflation data from Europe, followed by Powell's speech which showed us the future of the Fed's policy.
As a reaction to all these fundamental releases, the EUR/USD managed to test the 1.03 level and then dropped a little before setting at 1.0292. Later in the day, the pair made a powerful rebound which made it reach 1.0455.
Fed Comments Served As The Pivot
Although there were a lot of economic releases, the major event was most definitely the Fed's Powell future guidance. He made it clear that rate hikes will become smaller and even less in frequency.
As for when that policy change will come into effect, he said it would be somewhere close to the upcoming December meeting. He said that the current monetary policy had reached a level where it will be enough to bring down inflation.
Looking ahead, it seems that there will be more economic indicators that could dictate the next direction of EUR/USD. The most important of them all is the PMI data from Europe for the month of November.
From the USA, we have household spending as well as household income along with the PCE price index. All of these are important indicators used by the Fed to gauge inflation.
Tomorrow, we also have the NFP report, which will tell us about the labor market situation during November. The general consensus is that 200,000 new jobs will be added to the economy. Similarly, the unemployment rate will be around 3.7%.
But if we get any deviation from the levels mentioned above, a lot of volatility will find its way into the EUR/USD as well as other major pairs. On the upside, EUR/USD has to face resistance at 1.05 and towards the downside, there's the support at 1.04 and the 1.0369 (200 SMA).