Ahead of US Jobless Claim Release: Euro Recovers from 1.1780 to 1.1750
- The Fed cut rates as anticipated, indicating further easing on Wednesday, although policymakers are divided on future rate paths.
- A moderate risk appetite may support a recovery for the US dollar on Thursday.
The EUR/USD currency pair managed to regain some earlier losses in the early European sessions on Thursday, but it struggled to maintain levels above 1.1850, settling at around 1.1820.
In the US, unemployment benefit applications are projected to drop to 240,000, down from 263,000 the previous week. Meanwhile, ongoing claims are forecasted to rise slightly, from 1.93 million to 1.95 million.
Additionally, the Philadelphia Fed’s manufacturing index is expected to show a modest recovery, rising to 2.3 in September after a contraction of 0.3% in August.
The US Central Bank is expected to meet market expectations by lowering rates by 25 basis points, aiming for a softer labor market. Projections suggest two more cuts in 2025 and one in 2026, though there’s a clear division among policymakers regarding the rate trajectory.
Federal Reserve Chairman Jerome Powell, in a recent press conference, referred to the decision as a “risk management reduction,” but he also cautioned that inflation is likely to continue its upward trend over the next few years, reaffirming the urgency to cut interest rates.
Daily Digest Market Mover: The US Dollar Sees Recovery as the Fed Aligns with Expectations
- The Federal Reserve will decrease the benchmark interest rate to a range of 4.0%-4.25%, with predictions suggesting additional cuts in upcoming meetings.
- The economic forecast for US GDP growth this year was adjusted slightly downwards, projecting growth at 1.6% followed by a consistent 1.8%. Core inflation remains targeted at 3% this year, aiming for 2.6% by 2026.
- Policymakers have differing opinions on interest rate adjustments; while the median forecast suggests a further reduction, the most hawkish members see a possible 4.4% rate in December.
- Recent macroeconomic data indicated an unexpected rise in US retail sales, with year-on-year figures hitting 0.6% and monthly increases of 5%.
- In Europe, ECB Vice President De Guindos indicated that current monetary policies remain suitable, suggesting that slight deviations from inflation goals may be tolerable.
- European data released on Wednesday showed stable inflation pressures, with the Harmonic Consumer Price Index (HICP) remaining at 0.2% and core inflation staying unchanged since July.
Technical Analysis: EUR/USD Sees Lower Corrections within Bullish Trends
The EUR/USD pair has experienced a bearish reversal following a nearly 2% rally from last week’s lows. After the Federal Reserve’s policy decision, the pair saw some withdrawal, yet the overall trend is still bullish. The four-hour Relative Strength Index (RSI) indicates a pullback from overbought levels but remains above the pivotal 50 mark.
The four-hour moving average convergence divergence (MACD) has crossed into bearish territory, yet bears might struggle against previous resistance areas around the support level of 1.1780, near 1.1755. Furthermore, support levels from late August lows intersect with the September lows around the 1.1700 mark.
On the other hand, immediate resistance appears at Tuesday’s high of 1.1878. Beyond that, the Fibonacci retracement level of 127.2% from September rallies points to 1.1935, which is also close to the psychological 1.2000 level.
Economic Indicators
First Unemployment Claims
First unemployment claims will be released by the US Department of Labor, reflecting the number of individuals submitting initial claims for unemployment insurance. A higher number than expected would signify a weaker US labor market, negatively impacting the economy and the dollar, whereas a decline may bolster the dollar’s strength.
Philadelphia Fed Manufacturing Survey
The Philadelphia Fed Manufacturing Survey is a broad index measuring manufacturing conditions and is linked to trends in the broader manufacturing sector as well as the ISM manufacturing index. Generally, positive readings are seen as favorable for the USD.
