EURUSD technical setup is bullishAny weakness tipped to be short-livedWatch German industrial data this weekLagarde and Powell speeches to provide interest

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The Euro to Dollar exchange rate's technical setup is bullish and advocates for further gains over the coming days, but progress will be tested by speeches from Jerome Powell and Christine Lagarde as well as some important German industrial production numbers.

Euro-Dollar powered higher on Friday to go back above 1.07 following the release of softer-than-expected U.S. labour market data that suggest the economy was cooling enough for the Federal Reserve to confidently exit its rate hiking cycle.

Odds of U.S. rate cuts in 2024 grew and weighed on U.S. bond yields, which boosted stocks and associated 'risk on' assets such as the Euro.

Above: EURUSD at daily intervals, showing an improved short-term setup. Set up a daily rate alert email to track your exchange rate OR set an alert for when your ideal exchange rate is triggered ➡ find out more.

Euro-Dollar's gains further cement the short-term improvement in the exchange rate's technical setup with a break and hold above daily trend resistance off the July high.

Gains through the upper 1.06s ensure solid support on dips remains evident, according to an analysis conducted by Shaun Osborne, Chief FX Strategist at Scotiabank.

"Trend strength signals are developing bullishly for the EUR on the intraday and daily oscillators, which should bolster support for the EUR on minor dips," says Osborne.

The Euro's recent run of strength will be tested this week by some Eurozone data releases and a speech by European Central Bank (ECB) President Christine Lagarde.

First up on Monday at 07:00 GMT is the release of German factory orders, which are expected to have shrunk 1.1% month-on-month in September as the sector's struggles extend.

Sentiment towards the German economy is already poor and well understood by currency markets, meaning any upside surprise would likely have a more significant impact on the Euro. Therefore, we are on the lookout for gains should data beat expectations.

Watch the release of the final Eurozone PMI for October, where any deviation from the initial release could spark a currency reaction (composite expected @ 46.5, services @ 47.8). Again, any upgrade would likely have the most significant market impact.

Tuesday at 07:00 GMT sees German industrial production for September, where a flat 0% is expected. The reaction function would be similar to the previous day's releases.

Wednesday, we will get a chance to see how the Eurozone's consumer is holding out in the face of higher interest rates as retail sales are due for release at 10:00 GMT. A -3.1% reading is expected.

On Thursday ECB President Lagarde speaks at 17:30 GMT, and the Euro will react to any fresh takes she might have on the economy and the outlook for interest rates. We doubt she would deviate away from the message further rate hikes will be forthcoming if the data warrants.

But she must surely acknowledge the progress being made on inflation and ongoing indications that the economy is struggling. If so, the Euro could come under pressure.

Above: ECB President Christine Lagarde. Image: Andreas Reeg/ECB.

The data pulse out of the United States turns lower over the coming days which means greater emphasis will be placed on the guidance offered by members of the Federal Reserve.

On our radar is FOMC member Waller, due to speak at 15:00 GMT on Tuesday, followed by Williams at 17:00.

But it will be Fed Chair Powell who will be of more interest with speeches on Wednesday at 14:15 and again on Thursday at 19:00.

Some speeches will have little to do with monetary policy, but given Powell speaks twice, we can expect some mention of the economy and the interest rate outlook.

The Fed maintained rates unchanged last Wednesday and said further rate hikes were likely. However, the Fed appeared to dismiss the odds of a December rate hike, which was a 'dovish' outcome consistent with a weaker Dollar.

In particular, Powell said, "given how far we have come [on rates and disinflation], along with the uncertainty and risks we face, the committee is proceeding carefully."

Powell also appeared to dismiss the usefulness of the September 'dot plot' chart, which signalled the Fed favoured one more rate hike this year. Powell said that the efficacy of the dot plot "decays between meetings".

To what extent is this theme confirmed this week will matter for the Dollar.