EUR/USD: Correction has likely ended, focus on German CPI and Fed rate decision

• Tuesday's bullish hammer indicates the path of least resistance for EUR/USD is on the higher side. 
• A below-forecast German CPI will likely play spoilsport. 
• Fed is expected to keep rates unchanged and signal a pause in the easing cycle.  

EUR/USD's correction from recent highs near 1.1180 has likely ended and that level could come into play again if the German inflation beats estimates and the Federal Reserve (Fed) delivers a dovish rate cut.

Bull hammer

The currency pair carved out a bullish hammer candle on Tuesday, marking a strong follow-through to Monday's bullish inside day candle. 

The back-to-back bullish candles indicate the pullback from 1.1180 has likely ended up creating a bullish higher low near 1.1073. 

Put simply, the path of least resistance is to the higher side. 

German CPI due at 11:00 GMT

The preliminary German consumer price index for October is tipped to remain unchanged at 0% month-on-month and decelerate slightly to 1.1% from 1.2% in annualized terms. 

A weaker-than-expected data would validate the European Central Bank's (ECB) latest stimulus, pushing the EUR lower. 

The pair may also take cues from the German jobs data due at 08:55 GMT. Across the pond, the preliminary US Q3 GDP and the monthly ADP Employment figures could move the needle on the EUR pairs ahead of the Fed rate decision. 

Fed to cut rates by 25 bps

The Fed is expected to deliver a third 25 basis point rate cut of 2019 on Wednesday and signal a pause in easing. A hawkish rate cut could put a bid under the USD, capping the upside in EUR/USD. 

The market has already priced in the rate cut. EUR/USD, therefore, may gain altitude only if the Fed keeps the doors open for another rate cut before the year's end. 

Technical levels