The euro strengthens past 1.1750, but hovers in the middle of last week’s range.
- Concerns over a possible US government shutdown keep the dollar on the defensive.
- Weak Eurozone data and new US tariffs dampen risk appetite, limiting euro gains.
As of Tuesday, the EUR/USD is trading with moderate gains above 1.1750. The pair rallied from a low of 1.1660 last week, driven by worries surrounding a likely US government shutdown set for 4:01 GMT on Wednesday. However, a negative market sentiment and disappointing Eurozone economic indicators are continuing to hold back euro enthusiasts.
President Trump’s meeting with bipartisan congressional leaders on Monday resulted in no progress, affirming expectations that the government is on the brink of a shutdown. This shutdown could hinder the release of crucial macroeconomic data from the U.S. Department of Labor and Commerce, including Friday’s vital non-farm payroll report, thus impacting economic growth.
On another note, Trump added to market unease on Monday with the announcement of new tariffs. A 10% tax on conifer imports and a 25% levy on certain foreign furniture items will begin on October 14, alongside tariffs on trucks and brand-name medicines that kick in on Wednesday.
In the Eurozone, German retail sales contracts have backed off for the second straight month, dropping 0.5% in July and by 0.2% in August—contrary to hopes for a 0.6% rebound. Attention now shifts to Germany’s unemployment statistics for August and the consumer price index in September, notably ahead of a speech from European Central Bank (ECB) President Christine Lagarde. Meanwhile, in the US, highlights include job openings and consumer confidence data for August.
Market Analysis: A Muted Market Amid Potential US Shutdown
- The looming threat of a US government shutdown keeps the dollar cautious, while Trump’s new trade tariffs further diminish risk appetite, trapping the major FX exchanges and EUR/USD within prior ranges.
- Macro data from Europe isn’t encouraging. German retail sales fell 0.5% in July and 0.2% in August against expectations.
- Also, Germany’s import price index dropped by another 0.5% in August, following a 0.4% decline in July, greatly exceeding the 0.2% decrease anticipated.
- Additionally, Germany’s preliminary consumer price index is set to rise at a modest 0.1% in September, up to 2.3% from 2.2% in August.
- Eurozone data released Monday indicated a slight improvement in consumer confidence, rising from -15.5 to -14.9 in September, although industry trust showed a minor decline.
- During the US session, traders will likely focus on job openings, especially given the impending government shutdown which could delay Friday’s NFP report. A slight reduction in employment vacancies from 7.18 million in July to 7.1 million in August is expected.
Technical Analysis: EUR/USD
Looking at EUR/USD, the resistance points are at 1.1755 and 1.1790. Current technical indicators suggest slightly reversed momentum, with the 4-hour relative strength index (RSI) above the 50 marker and MACD exceeding the signal line. However, this trend appears fragile amidst a cautious market.
On Monday, the bulls faced rejection at a Thursday high just beneath 1.1755. If they can surpass these levels, they may break the immediate bearish trend and redirect towards the peaks near 1.1820 from September 23rd and 24th.
For now, daytime support around 1.1710 is holding off the bears ahead of lower territories seen last week around 1.1645-1.1655, with more distant targets near previous lows around 1.1610 and a potential drop to 1.1575.
