Euro Slips While US Dollar Maintains the Lead-Fundamental & Analytics

Oct 6, 2022
VOT Research Desk

Key News – Insights and Analysis

After the US Dollar resumed strength, support for the euro waned. The Fed reminded markets of their intention, and yields responded.

Despite the general weakness of the US dollar against other currencies, EUR/USD was unable to break parity this week. The market had developed hopes that the Federal Reserve’s aggressive tightening stance would end. Those hopes have come to nothing.

Along with other speakers from the Fed, San Francisco Fed President Mary Daly has been busy over the past few days making sure the market is prepared for the next big hike at the Federal Open Market Committee (FOMC) meeting in early November.

She has said so far this week that inflation is “corrosive,” “toxic,” and “problematic” and that the people who are in pain are complaining about inflation rather than jobs.

The market anticipates a 75-basis-point increase, and the yield on a one-year Treasury is once more close to 4.20%.

On the other side of the Atlantic, the European Central Bank is expected to raise interest rates by 75 basis points at their October 27 meeting. Their most recent meeting’s minutes will be made available later today, which may provide additional insight into their thinking going into the October meeting.

Due to the immense strain on the continent’s energy resources, the coming northern winter poses significant threats. Even though many of the EU’s member states have done a good job of scrambling to protect their reserves, there isn’t yet a way to completely replace Russian supply, which could have an impact on several aspects of the EU’s economy, not the least of which is industrial production.

The downward trend for EUR/USD may continue due to the Fed’s reiteration of their hawkish stance and the Eurozone’s underlying economic fragility.

After failing to break out of the channel’s upper band, EUR/USD is still trading in a trend channel that is downward. A close above it and the 55-day simple moving average (SMA) may indicate that bearish momentum has subsided.

Technical Analytics

The price is still above the shorter-term 10-day SMA, close to the 21-day SMA, and below the 55- and 100-day SMAs for the time being. This could imply that the underlying bearish momentum is still developing, but that momentum in the near term is currently stalling.

Before a group of breakpoints and a previous high in the 1.0340–1.0370 range, the peak at 1.0198 earlier this month and this week’s high of 0.9999 may serve as resistance.

The breakpoint of 0.9864 or the most recent low of 0.9536 could serve as support.

Crucial Indicators – (Weekly)

EUR/USD

0.9883

Summary: STRONG SELL

Moving Average s: Buy (1)Sell (11)

Technical Indicators: Buy (0) Sell (10)

Pivot Factors Oct 06,

Technical  Indicators  Oct 06,

Moving Avg Oct 06, 2022