EUR/USD, Oil Forecast: Two trades to watch

EUR/USD falls ahead of ECB’s Lagarde & US jobless claims 

• EC downwardly revised eurozone growth forecasts for 2023/4 
• US jobless claims are expected to rise to 220k 
• EUR/USD consolidates around 1.0850 

EUR/USD is falling for a second straight day on USD strength and as investors look ahead to US data along with a speech by ECB president Christine Lagarde. 

Comments by ECB president Lagarde will be watched closely. Previously, Lagarde has indicated that the central bank would not begin considering rate cuts for the coming two quarters. Investors will be keen to see whether her view has changed after the European Commission downwardly revised growth forecasts for the eurozone for 2023 and 2024. 

Meanwhile, the USD recovered from a 2.5-month low after stronger-than-expected retail sales data yesterday highlighted the resilience of US consumers despite the Fed's aggressive rate hikes. The data has raised questions over whether the Fed will start cutting rates in June next year. The market may have gotten carried away with itself following weaker-than-expected CPI data and an unexpected monthly fall in PPI data. 

Attention turns to US jobless claims, which will provide further clues about the health of US economy. 

Jobless claims are expected to tick higher to 220K, up from 217K in the previous week. However, continuous claims could provide more insight and are expected to rise for an eighth straight week to 1847K, up from 1834K.  

Persistently rising jobless claims suggest that Americans who are unemployed are finding it harder to find a job. Weakness in the labour market would support a more dovish stance from the Federal Reserve and could fuel bets of a dovish pivot from the Fed. 

US industrial production is also due to be released and is expected to show a slight weakening of 0.3% MoM in October after rising 0.3% in September. 

Several fed speakers, including Fed Williams Waller and Mester also expected to speak. Their comments will be watched for any clues over the outlook for the US economy, inflation and the future path of interest rates. 

EUR/USD outlook – technical analysis 

EUR/USD broke out of the rising channel, pushing above the 200 SMA before running into resistance at 1.0890.  

The price is consolidating around 1.0850, showing positive signs with the RSI above 50. 

Buyers will look for a rise above 1.0890 to bring 1.0940 (the August 31 high) ahead of 1.10. 

On the downside, support is at 1.08, the confluence of the 200 sma and the rising trendline support. A break below here brings 1.0660, the weekly low into play. 

Oil falls for a third straight day 

• US inventories rose 3.6 M vs 1.8M forecast 
• Chinese data disappoints raising concerns over the demand outlook 
• Oil failed to close above the 200 SMA 

Oil is heading lower for a third straight day as concerns of record high U.S. oil output combine with concerns over demand from China, pulling the price lower. 

Data showed that China's oil refinery throughput cooled in October compared to the previous month. China housing data was also weaker than expected, falling for a fourth straight month and raising concerns over the outlook for the Chinese economy. Although industrial production and retail sales earlier this week were stronger than expected. 

Yesterday, the Energy Information Administration reported that inventories of US crude oil rose by 3.6 million barrels in the week ending November the 10. This was well ahead of the 1.8 million barrels that was expected. 

The larger-than-expected increase in inventories offset recent optimism surrounding the demand outlook for crude oil after OPEC and the IEA provided upbeat demand outlooks earlier in the week. 

The rebound in the US dollar is also adding pressure to oil prices. The US dollar has risen from a 2 1/2 month low after data on Wednesday showed US producer prices slowed more than expected in October, but US retail sales were stronger than forecast. The stronger dollar makes oil more expensive for buyers with foreign currencies. 

Oil forecast – technical analysis 

Oil failed to close above the 200 sma and has rebounded lower. Sellers will look to take out support at 74.54 the November low to extend losses towards 72.50 ahead of 70.00 the psychological level. 

Any recovery needs to rise above the 200 sma at 78.00 and take out the weekly high, just below 80.00 to create a higher high and bring 83.30 the November high into focus.