The Euro has been under pressure, hovering around 1.0680 against the US Dollar, while European stocks showed resilience with a positive performance. Market attention is turning towards the eagerly awaited US inflation figures, anticipated to steer market sentiment in the upcoming days.
In this scenario, the EUR/USD pair weakened as the Euro lost its initial strength against the Dollar, slipping to daily lows near 1.0670. Conversely, the US Dollar bounced back from recent declines, nearing the crucial threshold of 106.00 on the USD Index (DXY), mainly driven by a minor uptick in US yields. The market sentiment appears shaped by conflicting viewpoints between recent hawkish statements from Federal Reserve officials and investors’ beliefs, contributing to uncertainties about the Fed’s future policy direction.
Meanwhile, Christine Lagarde, President of the European Central Bank (ECB), reiterated concerns about elevated inflation levels, emphasizing the ECB’s commitment to tackling inflation and advocating for a continued restrictive stance for an extended duration. These comments reaffirm the ECB’s cautious approach toward managing inflation amid ongoing economic uncertainties. In summary, the EUR/USD interplay reflects Euro’s struggles against the Dollar, while the impending release of US inflation data holds significant potential to influence market sentiment. The contrasting perspectives regarding central bank policies, especially between the Fed and the ECB, continue to impact currency movements in this dynamic economic landscape.
Euro falters once again around the 1.0700 barrier
The EUR slipped after surpassing 1.0700 against the USD. US and German yields made slight gains. Investor expectations lean toward the Fed holding rates in December. The ECB confronts challenges in its tightening strategy due to persistent domestic price pressures highlighted by Vice President De Guindos. Geopolitical tensions in the Middle East remain a concern. Japan reiterates its stance against sudden FX fluctuations. The upcoming release of US CPI and PPI data holds significant weight in shaping market sentiment and policy directions.
Technical Analysis: Euro’s outlook remains bearish below 1.0800
EUR/USD faces renewed selling pressure following another failed attempt to surpass the 1.0700 mark on Monday.
Further recovery could see EUR/USD revisit the November top of 1.0754 (November 6) prior to the 200-day Simple Moving Average (SMA) at 1.0801 and the weekly peak of 1.0945 (August 30). The psychological level of 1.1000 comes next ahead of the August high of 1.1064 (August 10) and another weekly top of 1.1149 (July 27), all preceding the year-to-date peak of 1.1275 (July 18).
If sellers regain the upper hand, the pair might initially face transitory contention at the 55-day SMA at 1.0640 ahead of the weekly low of 1.0495 (October 13) and the 2023 low of 1.0448 (October 15).
Further weakness in the pair remains on the cards while it trades below the 200-day SMA.