A daily digest that moves the market: The euro does not rise despite a brighter market mood
EUR/USD held steady in early European trading on Monday, around 1.1665. There was a slight uplift in market sentiment, briefly pushing the pair to 1.1650. However, disappointing German producer inflation data limited any upward movement.
Market participants felt relieved when US President Donald Trump acknowledged that imposing a 100% tariff on China, a threat he made two weeks ago, isn’t feasible. On the same day, US Treasury Secretary Scott Bessent announced plans to meet with Chinese Vice Premier He Lifeng this week, hinting that both nations might be looking to ease their trade tensions.
In the U.S., worries about problematic loans from local banks, which stirred up markets late last week, seem to be fading. Quarterly reports indicate that credit conditions and profits at major banks remain robust. This has contributed to a more optimistic market mood, putting pressure on the generally safe-haven US dollar.
In Europe, Germany’s producer price index (PPI) for September came in lower than anticipated for the third month in a row. This could weigh on the euro’s value. Meanwhile, the economic calendar for Monday is rather sparse, with only speeches from European Central Bank board members Isabel Schnabel and Joachim Nagel being noteworthy. No related announcements are expected from the U.S.
- A strengthening US dollar and improving market sentiment lend some support for the euro, but there’s a lack of solid fundamentals to drive a strong recovery. Prices have remained within Friday’s range, and investors seem reluctant to sell the US dollar, with the pair seemingly in search of direction while awaiting further updates on US-China trade relations.
- According to data from Destatis, Germany’s PPI dropped by 0.1% in September, contrary to the expected increase of 0.1%. This follows declines of 0.5% and 0.1% in August and July, respectively. Year-over-year, the PPI has decreased by 1.7%, after falling by 2.2% in August.
- On Monday, China released macroeconomic data indicating GDP growth of 1.1% for the third quarter, surpassing expectations of 0.8%. Industrial production grew at an annual pace of 6.5%, while retail sales increased by 3% in September, all outperforming forecasts. This suggests the Chinese economy is holding up well despite heightened tariffs from the U.S. Consequently, positive market sentiment benefitted China’s proxy currencies, the Australian and New Zealand dollars, while putting downward pressure on the US dollar.
Technical analysis: EUR/USD is testing the countertrend line near 1.1650
The EUR/USD pair reached its double bottom target at 1.1730 last week but has since declined. Currently, it’s testing a key trendline support around 1.1650 and remains in a bearish trend, although any upward movements seem restricted. The 4-hour Relative Strength Index (RSI) is hovering around the neutral 50 mark, indicating a lack of clear directional bias.
If the pair confirms a break below 1.1650—an area that previously marked resistance on October 9th and 15th—the bearish momentum could strengthen, allowing a push toward the October 15th low near 1.1600 and the October 14th low around 1.1545. On the upside, the intraday high of 1.1675 is significantly lower than last Friday’s peak of approximately 1.1730, making a rise above those levels unlikely. However, a return to the October 1 high of 1.1775 could still be on the horizon.
