EUR/USD, FTSE Forecast: Two trades to watch

EUR/USD falls ahead of US inflation data

EUR/USD is falling for a fourth straight day, as the U.S. dollar strengthens and attention turns to US inflation data.

US CPI is expected to rise to 2.6% YoY in October, up from 2.4% in September, and core inflation is expected to remain sticky at 3.3%. Hotter-than-expected inflation could see the market rein in Fed rate cut expectations further.

The U.S. dollar has rallied following Trump's victory on expectations that the Fed will need to cut rates at a more gradual pace owing to the new President’s inflationary policies.  The market is pricing in a 60% probability of a December rate cut down from 80% prior to the election.

The EUR has fallen sharply since Donald Trump's victory, fueled by fears over the impact of trade tariffs on already fragile eurozone growth. Tariffs could knock growth off course and force the ECB to cut interest rates more aggressively.

Yesterday, German ZEW economic sentiment was weaker than expected amid rising concerns over Trump's trade tariffs and political uncertainty in Germany.

The eurozone economic calendar is quiet today. Attention will turn to tomorrow's GDP figures for more insight into the health of the region's economy.

EUR/USD forecast – technical analysis

After failing at the 100 SMA, EUR/USD has rebounded lower, breaking below several key supports, including the 200 SMA, to test 1.06, the April low.

Sellers will look to extend the bearish trend by taking out the 1.006 support, opening the door to the 1.05 round number and 1.0450, the 2023 low.

Any recovery in the price would need to rise above 1.0670, the June low, and retake 1.07 to extend gains towards 1.08. A rise above her negates the near-term uptrend.

FTSE inches cautiously higher from a 3-month low

UK stocks are inching higher after closing at a three-month low on Tuesday, as investors looked cautiously ahead to US inflation data.

The FTSE has struggled since Trump's victory, trading lower in five of the past six trading days as investors consider the likelihood of President-elect Trump imposing tariffs and adopting a tougher stance on Europe and China.

Meanwhile, data yesterday showed that UK wages accelerated more than expected in September, although the unemployment rate rose unexpectedly, which leaves the Bank of England in a difficult position as it considers whether to cut interest rates in December. Comments by Bank of England chief economist Huw Pill, he considered wage growth still too strong, which means that a February rate cut is more likely than a December move.

Attention is turning to US inflation later today. Weaker US inflation could see the market price in a higher chance of the Fed cutting rates in December, which would be positive for stocks.

The UK economic calendar is quiet today. UK GDP and retail sales are due later in the week.

In corporate news, Smith Group shares jumped by 21% to a record high after the company lifted its revenue and margin forecasts amid strong growth across all divisions and started its shareholder buyback programme.

Experience shares traded lower despite solid guidance, potentially owing to a weak than expected recovery in its Latin American broker-to-broker business.

FTSE forecast - technical analysis

The FTSE has broken out of the familiar range of 8150 – 8325, within which it has been trading since May. It has formed a series of lower lows and lower highs and has also broken below the 200 SMA for the first time this year as the price heads toward 8000. The 50 SMA is crossing below the 50 SMA in a bearish signal.

Should sellers take out the 8000 support, this opens the door 7910, the August 5 low.

On the upside, resistance can be seen at 8120, the 200 SMA and 8150. Above here 8250, the 100 SMA comes into play.