EUR/USD Outlook: 0.9900 mark holds the key for bulls ahead of Eurozone CPI/GDP

• EUR/USD is seen consolidating last week’s post-ECB rejection slide from the 100-day SMA.
• Traders seem reluctant to place aggressive bets ahead of the key central bank event risks.
• A sustained break below the 0.9900 mark is needed to support prospects for further losses.

The EUR/USD pair extends its sideways consolidative price move below the parity mark through the Asian session on Monday amid uncertainty over the pace of future rate hikes by the European Central Bank. The ECB last Thursday lifted borrowing costs by a jumbo 75 bps for the second consecutive meeting and is expected to raise interest rates further to bring record inflation under control. The ECB, however, adopted a more dovish tone in the wake of the worsening economic outlook, forcing traders to trim their bets for a more aggressive tightening. This is seen as a key factor that continues to act as a headwind for the shared currency.

On the other hand, the US dollar draws support from last week's stronger-than-expected US macro data, though speculations about a potential Fed pivot keep a lid on any further gains. It is worth recalling that the Advance US GDP report showed that the world's largest economy grew by 25.6% annualized pace during the third quarter. Moreover, the Core PCE Price Index, the US central bank's preferred inflation gauge, increased to 5.1% YOY in September from 4.9% previous. That said, signs of a slowdown in the US economy might force the Fed to soften its hawkish stance, which, in turn, is holding back the USD bulls from placing fresh bets.

Hence, investors prefer to move to the sidelines and wait for the highly-anticipated FOMC decision, due to be announced on Wednesday. The outcome of a two-day monetary policy meeting will play a key role in influencing the USD price dynamics and help determine the near-term trajectory for the EUR/USD pair. In the meantime, traders on Monday will take cues from the flash Eurozone CPI and the first reading of the third quarter GDP. The immediate market reaction, however, is likely to be limited as the focus remains glued to the key central bank event risk. Furthermore, worries about the economic headwinds stemming from the protracted Russia-Ukraine war suggest that any positive intraday move might still be seen as a selling opportunity.

Technical Outlook

From a technical perspective, the post-ECB rejection slide from the 100-day SMA, so far, stalls near a descending trend-line resistance breakpoint, now turned support, currently around the 0.9925-0.9920 area. The said region should act as a pivotal point for intraday traders, below which the EUR/USD pair could accelerate the fall towards the 0.9860-0.9855 horizontal support. Some follow-through selling will negate any near-term positive bias and drag spot prices back below the 0.9800 round-figure mark, towards testing the next relevant support near the mid-0.9700s.

On the flip side, the 1.0000 psychological mark could be an immediate strong barrier. Sustained strength beyond might allow bulls to aim back to challenge the 100-day SMA, currently around the 1.0075region. This is closely followed by the monthly peak, just above the 1.0100 mark, which, if cleared decisively, will set the stage for additional gains. The EUR/USD pair might then aim to reclaim the 1.0200 round figure with some intermediate resistance near the 1.0155 zone.