• EUR/USD heads for weekly gains, but off highs. 
• US Dollar without a clear direction on Friday ahead of Fed’s week. 
• Wall Street posts important gains. 

The EUR/USD is hovering around 0.9950, flat for the day and higher for the week. The euro climbed recently to 0.9990 but quickly pulled back, approaching daily lows as the US dollar moves sideways across the board. 

The dollar trades without a clear direction, even after US data on Friday and ahead of a critical week. The DXY is up by 0.25% (mostly due to the USD/JPY rally) and US yields are off highs. In Wall Street, equity prices are up by more than 1.25% on average. 

On a weekly basis, EUR/USD is about to end with a 100-pip gain but the fact that is has pulled back more than 150 pips from the high, is a negative sign for euro bulls. The pair peaked near the 20-week Simple Moving Average and then started to move to the downside. 

Inflation vs growth 

Data released on Friday, showed a new record high inflation reading in Germany during September with the annual rate reaching 10.4%. “There is no relief in sight, and the inflation rate is only likely to fall in the coming year because energy prices are unlikely to rise as strongly as they have this year, also due to government intervention. However, the underlying price pressure is likely to remain strong. Today's price data confirm our expectation of a double-digit euro area inflation rate in October”, said analysts at Commerzbank. 

In the US, the Core PCE deflactor came in at 5.1% in September, slightly below the 5.2% of market consensus. It is not a fresh high but still remains elevated. Market participants continue to price in a 75 basis points at next week’s FOMC meeting. 

The economic calendar for next week also includes Eurozone inflation and the US official employment report. Volatility appears to be warranted. 

Technical levels