Euro maintains its downward trend against the US Dollar.
The Euro (EUR) continues to fall against the US Dollar (USD). Leading EURUSD to fall further and retest the 1.0670 level on Wednesday.
On the other hand, the US dollar strengthens more. Driving the USD Index (DXY) to around 105.80 on the back of ongoing weakness in the broader risk environment. While US yields remain sidelined so far.
In terms of monetary policy, market players are more convinced. That the Federal Reserve (Fed) will maintain its current monetary posture indefinitely. For the time being. The possibility of an interest rate hike in December has lost some traction. Particularly following the previous FOMC meeting and the revelation of weaker than expected October Nonfarm Payrolls data (+150K jobs).
A similar mood can be noticed with the European Central Bank (ECB). As markets now anticipate a prolonged stalemate in its tightening efforts, most likely until the end of next year.
On the euro calendar, Germany’s final Inflation Rate showed the CPI growing 3.8% YoY in October and remaining flat on a monthly basis. Retail Sales in the eurozone are also due later in the session.
Mortgage Applications, as measured by MBA, are due to be seconded by Wholesale Inventories across the pond. Furthermore, investors are Expected to closely monitor Chair Jerome Powell’s speech, especially in light of increased speculation regarding likely Fed rate decreases as early as the summer of 2024, as opposed to the persisting tighter-for-longer narrative heard from other Fed speakers.
Later in the session, FOMC Governor Michael Barr (permanent voter, centrist), NY Fed John Williams (permanent voter, centrist), and FOMC Governor Philip Jefferson (permanent voter, centrist) are also slated to speak.
Daily market movers: The Euro is on the defensive in the face of Dollar gains.
The EUR is under increased pressure against the USD.
So far, US and German yields have traded in an indecisive manner.
Markets expect the Fed to continue its current monetary policy in December.
The ECB looks to be planning a protracted pause until H2. 2024.
Geopolitical concerns in the Middle East continue unabated.
The focus will be on Chair Powell’s address.
Technical Analysis:
The euro faces a temporary support around 1.0645. EURUSD corrects downward on Tuesday and revisits the sub-1.0700 zone.
If the selling pressure persists, EURUSD may return to the weekly low of 1.0495 (October 13), ahead of the 2023 bottom at 1.0448 (October 15) and the round number of 1.0400.
On the upside, the November high of 1.0754 (November 6) stands in the way of the crucial 200-day SMA at 1.0802 and another weekly high of 1.0945 (August 30). North from here, the psychological level of 1.1000 is aligned with the August peak of 1.1064 (August 10) and the weekly high. All of this came before the 2023 high of 1.1275 (July 18).
So far, the pair’s outlook remains bearish as long as it trades below the 200-day simple moving average.
