EUR/USD extends gains with all eyes on Eurozone inflation figures

• The Euro extends gains above 1.1770, buoyed by broad-based US Dollar's weakness.
• The shutdown of the US federal government keeps the US Dollar on the defensive.
• In the Eurozone, all eyes are on preliminary inflation figures for September.

EUR/USD extends gains for the fourth consecutive day on Wednesday, trading at fresh one-week highs beyond 1.1770 at the time of writing. The US Dollar remains on the defensive as the US federal government shut down earlier in the day, due to the two main parties being unable to bridge their differences on funding, while in Europe, all eyes are on the Harmonized Index of Consumer Prices (HICP) scheduled at 09:00 GMT.

A last-minute vote in the US Senate failed to pass the Republicans' funding bill, leading to the government's closure. The economic impact should not be significant, unless the situation extends in time. However, it might delay the release of the US Nonfarm Payrolls report on Friday, which is a key data point for the Federal Reserve's monetary policy decision due in late October.

US JOLTS Job Openings data was mixed on Tuesday, showing a slight increase in job vacancies but less hiring. Later today, the ADP Employment Change report is expected to show that private payrolls increased by 50K in September, a poor reading compared with last year's averages and further evidence that employment creation has stalled.

In Europe, the main attraction this Wednesday will be September's preliminary inflation figures, which are expected to show some acceleration. On Tuesday, German consumer prices increased more than expected and boosted speculation of an overshoot in Eurozone HICP, which might endorse the view of the European Central Bank's hawks. Such an outcome might give the Euro an additional impulse.

Daily digest market movers: The US Dollar struggles with the government closed

• The Euro is capitalising US Dollar's weakness after the US government confirmed the worst expectations and shut down earlier on Wednesday. Recent macroeconomic data releases have failed to improve investors' mood, and barring a positive surprise, the ADP Employment Change report is unlikely to change this mood. The risk for the US Dollar is skewed to the downside on Wednesday.
• In Europe, all eyes are on September's Eurozone HICP numbers, which are expected to show that yearly inflation accelerated to a 2.2% rate from 2% in August. The core inflation, however, is seen at a 2.3% year-on-year rate, unchanged from the previous month.
• Data released by Destatis on Tuesday revealed that the German Consumer Price Index (CPI) accelerated to a 2.4% year-on-year pace in September, from 2.2% in August, beating expectations of a softer increase to 2.3%. Likewise, the HICP grew at a 2.4% pace, from 2.1% in the previous month and above the 2.2% market consensus.
• In the US, JOLTS Job Openings increased to 7.22 million in August from 7.20 million in July, beating expectations of 7.2 million openings, although the hiring rate eased to 3.2% from 3.3% in July, which adds to evidence of a deteriorating labour market and dampened investors' optimism about the headline reading.
• Later on Wednesday, Automatic Data Processing (ADP) will release its September payrolls report, which is expected to show a net change of 50K new jobs, down from the 54K seen in August and well below the levels beyond 100K seen last year and at the beginning of this one.

Technical Analysis: EUR/USD above 1.1760 to target 1.1790

EUR/USD is under moderate bullish pressure on Wednesday. The 4-hour chart Relative Strength Index (RSI) advances through positive territory beyond the 50 level, currently at 64, and the Moving Average Convergence Divergence (MACD) remains above the signal line. With the US Dollar Index (DXY) on the defensive, correlation studies suggest that further appreciation is on the cards.

Bulls have yet to confirm above Tuesday's highs around 1.1760, which are being tested at the time of writing. Further up, the next target is the reverse broken trendline, now at 1.1790. A successful break of that level would cancel the bearish trend from mid-September highs and shift the focus towards the September 23 and 24 highs, near 1.1820.

To the downside, immediate support is at the 1.1710-1.1715 area, where the pair was contained on Tuesday. Further down, last week's lows at the 1.1645-1.1655 area and the September 2 and 3 lows, near 1.1610, come into focus.