This coming week will be a very interesting (or we should say a volatile week) week for EURUSD as there are many important economic announcements scheduled in the coming week as follows
- US CPI on 13 Dec
- Fed Interest Rate Decision on 14 Dec
- ECB Interest Rate Decision on 15 Dec
It is time for us to be cautious again for the EURUSD market.
Last week, the PPI (Producer Price Index) YoY for November 2022 came out as 7.4%. Although is lower than October 2022 of 8.1%, it is still higher than the consensus of 7.2%. It means although the PPI is slowing down but is not at the pace the market expected.
PPI is always the leading indicator for CPI as Producer tends to sell at a higher price when their cost is increased. Hence, for the CPI next week, we probably will see a similar pattern where the CPI YoY will be lower than October 2022 of 7.7% but is still higher than the consensus of 7.3%.
If this happens, then it will raise the market’s concern again on whether US Federal Reserve will pro-long their interest rate hike cycle or expect the targeted final interest rate to be higher.
At the same time, we have the US Fed Interest Rate decision and the ECB Interest Rate decision on Wednesday and Thursday. The consensus now is both will raise 0.5% but what is more important is their guidance for 2023, whether will be faster or slower on the rate hike.
On the other side of the world, China has released more news about re-open their economy and reducing their COVID restriction. This has caused most of the commodities like copper and iron ore price spiked to recent highs. This is definitely not good for inflation but on contrary, Crude Oil is weak despite there being a few positive news. Eg, China’s re-opening means increased demand for crude oil, and Russia cut oil output due to the West’s price cap.
EURUSD Bullish Factors
- Bullish Guidance for 2023 from the ECB to increase the pace of the interest rate hike.
- ECB raised the interest rate more than the consensus of 0.5%.
EURUSD Bearish Factors
- US CPI YoY came out higher than the consensus of 7.3%. Or even worse case, higher than the October 2022 CPI of 7.7%
- Bullish Guidance for 2023 from the US Fed to increase the pact of the interest rate hike.
- US Fed raised the interest rate more than the consensus of 0.5%.
- Energy Crisis for Europe is materialized this winter.
- The potential return of the European sovereign debt crisis is another factor to watch. The interest rate rise in the European zone will cause weaker European countries that have higher debt will need to repay their debt at a higher rate.
Recommendation
With this outlook, and to be on the safe side, we strongly recommend all Ophiuchus and Limitless EA users to schedule to stop trading for this period starting from 13 Dec till 16 Dec. You can use the stop trading period feature in the EA to do that. You can also decide to extend the stop trading period (eg, till 19 Dec and only start trade on the week after next) if you would like.
Disclaimer – Please note that Limitless Trading is not liable for our recommendation and is not responsible for any loss or profit caused by this recommendation. You should assess your personal circumstances and perform your own research to make decisions for your trading.
