EURUSD Fundamental Analysis Ahead of German CPI

The euro may fall below 61.8% Fib support, thanks to optimistic US data and political tensions between the United States and China. A break down will probably remain elusive if the German CPI exceeds expectations. German inflation would have fallen by 0.6% in November. Here is the EURUSD Fundamental Analysis of 28 November, 2019.

28 November, 2019 | AtoZ Markets – EURUSD is running on slippery bases. And it will probably struggle to defend key support unless German inflation data, expected at 13:00 GMT, shatters estimates and weakens expectations for ECB.

EURUSD Fundamental Analysis – 28 November 2019

The currency saw a downward trend on Wednesday. Reinforcing the downward bias put forward by the decline of the highest at 1.1097 reached on 21 November. Third-quarter gross domestic product revised upward from 1.9% to 2.1%, mainly due to higher consumer spending. The core PCE, the Fed’s preferred inflation measure, which excludes food and energy price volatility, increased from 1.9% in the second quarter to 2.1%. The inflation indicator exceeded an estimate of 1.7%.

Positive US data may continue to push the dollar higher on Thursday. Meanwhile, traders could offer euros, as President Trump’s decision to sign the Hong Kong Democracy Bill angered China. And it sparked fears of spillover on the trade front. This is clear from the 0.25% decline in the S&P 500 Index futures at the time of going to press. Overall, the EURUSD looks set for a convincing break below 1.0994, the Fibonacci retracement to 61.8% from 1.0879 to 1.1179.

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German consumer price index (CPI)

The breakdown could remain elusive if the preliminary German consumer price index (CPI) for November is well above estimates. That would allow Christine Lagarde, director of the European Central Bank, to maintain her neutral-to-hawkish stance for a while. Last week, Lagarde called for a fiscal stimulus and said the central bank is monitoring the side effects of its policies.

The CPI is expected to fall by 0.6% month-on-month in November, after rising 0.1% in October. EURUSD may rebound sharply from 1.10 if the inflation rate exceeds estimates by a large margin. On the other hand, a larger-than-expected decline will likely accelerate to recent declines below 1.09.

Markets should be pretty cool with the United States out on holiday. But we are keeping an eye on the EURUSD. It has temporarily fallen below 1.10 as a result of a strong wave of US data today (including durable goods).

With the Fed comfortably on hold and next week’s schedule peppered with high-level data from ISMs at wages, the dollar could become more sensitive to surprise data momentum and in particular, the US again. 1.0989 will be a significant interim pivot of the EURUSD ahead of the 1.0880 / 1.0925 support zone. 

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