EUR/USD reclaims 1.1600 amid risk-on market sentiment

• The shared currency stages a recovery reclaims 1.1600.
• China’s weaker than expected GDP dented the market sentiment.
• At press, the market sentiment is upbeat, despite US dollar strength.
• ECB Christine Lagarde insists that “inflation is largely transitory.”
• EUR/USD: Range-bound within the 1.1560 – 1.1620 area, RSI is at 44 flat.

The EUR/USD advances during the New York session, up 0.07%, trading at 1.1610 at the time of writing. During the session, market sentiment conditions improved despite a weaker than expected third-quarter GDP print out of China, rising inflationary pressures, and central bank tightening monetary conditions expectations. 

In the Asian session, China’s GDP for the third quarter rose by 4.9% (YoY), lower than the 5.0% expected, which trailed the 7.9% increase of the second quarter. The ongoing energy crisis that hit the Asian dragon forced factories to curb output. Furthermore, Industrial Production for September also came short of expectations with a 3.1% (YoY) increase versus 3.8% (YoY) estimated.

That said, investors flew through safe-haven assets, mainly towards the US dollar, but as the market improved, the EUR/USD pair reclaimed the 1.1600.

Meanwhile, the US Dollar Index that tracks the buck’s performance against a basket of six currencies is gaining 0.02%, sits at 93.97, whereas the US T-bond  10-year yield is up to one a half basis points currently at 1.591%.

On Saturday, October 16, ECB’s President Christine Lagarde said that the ECB is paying “very close attention” to wage negotiations and other effects that could permanently drive prices higher after delivering 2021 Per Jacobsson Lecture at the IMF.  She added that “inflation is largely transitory.” 

The European economic docket is absent. Across the pond, the US Industrial Production for September on a monthly reading shrank 1.3%, versus an expansion of 0.2% estimated by investors, while Capacity Utilization expanded 75.2% worse than the  76.5% expected.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart shows the pair is range-bound within the 1.1560 – 1.1620 area. The Relative Strength Index at 44, trendless, depicts the pair is in consolidation. However, recent price action illustrates that an inverse head-and-shoulders pattern is forming, but a daily close above the neckline around 1.1625 is needed to confirm its validity. In that outcome, a move towards the 1.1700 figure is on the cards.

On the other hand, failure at 1.1625 would resume the downward trend of the EUR/USD pair. The first support would be the September 30 low at 1.1562, immediately followed by the October 12 low at 1.1524