The EUR/USD pair slipped into negative territory, dropping below 1.1600 for a second consecutive day as investors adopted a risk-averse stance, waiting for NVIDIA’s earnings and processing recent U.S. labor market data ahead of Thursday’s non-farm payroll report. Currently, it trades down 0.04% at 1.1586.
Wall Street struggles, dollar strengthens, and mixed US data affects euro
Concerns regarding a potential AI bubble are weighing on Wall Street, pushing stock prices down. Additionally, investors are keenly observing the latest minutes from the Federal Open Market Committee (FOMC) as U.S. data reveals the initial jobless claims reported since the government shutdown.
While Fed officials have maintained a hawkish tone recently, new data has raised the chances of a 25 basis point (bp) rate cut during the December meeting. However, a robust non-farm employment report on Thursday might cause a shift in expectations regarding further easing next month.
The euro is facing pressure from the strong dollar as well. The U.S. dollar index (DXY), which considers the dollar’s performance against six other currencies, increased by 0.04%, now at 99.57.
No significant documents were released on Tuesday in Europe. Economists forecast that eurozone inflation will remain stable, with the Harmonized Index of Consumer Prices (HICP) and core HICP staying around the European Central Bank’s (ECB) target of 2%.
Market trends: EUR/USD under pressure from mixed US indicators
- The Labor Department reported 232,000 new unemployment claims for the week ending October 18th. Additionally, the Commerce Department announced that factory orders for August rose by 1.4%, recovering from a decline of 1.3% in July, aligning with upward projections.
- Richmond Fed President Thomas Barkin stated that the Fed’s dual roles are “balanced,” mentioning potential inflationary pressures alongside risks to the labor market. He pointed out that the absence of concrete economic indicators complicates the assessment for policymakers.
- Fed Director Christopher Waller adopted a more dovish stance, labeling the labor market as “weak.” He also noted that inflation expectations have remained quite stable, with core inflation nearing the Fed’s 2% target.
- Currently, the market sees a 50% likelihood of a rate cut in December, according to the CME FedWatch tool. This is an increase from 46% earlier in the day, yet still below last week’s 67% chance.
- In Europe, October’s HICP is projected to remain steady at 2.1% year-on-year, with a month-over-month rise of 0.1% to 0.2%. Core HICP is anticipated to stay at 2.4% year-on-year.
Technical outlook for EUR/USD: Below 1.1600, focus on 1.1550
The EUR/USD pair has declined for a third day, dipping below the 20-day simple moving average (SMA) at 1.1580, suggesting further downward movement. If it breaks through 1.1550, it might head towards 1.1500. On the flip side, should EUR/USD climb above 1.1600, it could stay within the 1.1600-1.1650 range. A breach of that upper limit could lead to the 100-day SMA at 1.1659.
