EUR/USD Trading Activity
EUR/USD is holding steady around 1.1585 as the U.S. trading session is about to begin on Wednesday. This comes after a drop to a new weekly low of 1.1565, largely prompted by fresh eurozone inflation data. Risk aversion is boosting the safe-haven U.S. dollar (USD), especially as markets gear up for the release of the Federal Reserve’s minutes from their October meeting later today.
According to Eurostat’s early Wednesday figures, the eurozone’s harmonized consumer price index rose to 0.2% in October from 0.1% in September. Meanwhile, annual inflation dipped to 2.1% from 2.2%, inching closer to the European Central Bank’s (ECB) 2% target. The core HICP increased by 0.3% month-on-month and 2.4% year-on-year, up from the previous month’s 0.1% and 2.4% rates.
On the U.S. side, recent economic data isn’t particularly positive for the dollar. Jobless claims increased to 232,000 for the week ending October 18, beyond expectations. Additionally, the ADP Employment Change report showed an average reduction of 2,500 jobs weekly for the four weeks ending November 1. These figures suggest a softening labor market.
There’s a growing belief that the Federal Reserve may cut rates in December, although Richmond Fed President Thomas Barkin suggested on Tuesday that more data might be needed for the committee to determine its next steps regarding monetary policy.
As attention turns to the Fed minutes scheduled for release at 7 p.m. Japan time, market volatility is expected to remain low in anticipation of Thursday’s crucial U.S. non-farm payrolls report.
Market Trends: Euro’s Vulnerability
- The euro continues to trade sideways near week lows, with a prevailing market atmosphere giving an advantage to the safe-haven USD. Stock market declines have heightened safety concerns, putting risk-sensitive currencies like the euro at a disadvantage.
- New U.S. unemployment claims climbed to 232,000, while continuing claims hit 1.957 billion for the week ending October 18, higher than the prior week. This data comes just before the anticipated U.S. government shutdown.
- The ADP report indicated firms slashed an average of 2,500 jobs per week in the four weeks ending November 1. While this is an improvement from the previous four weeks’ average of 11,250, it still underscores a weak labor market and may press the Fed to lower rates further.
- On a positive note, U.S. factory orders for August rose by 1.4%, matching market expectations, which somewhat offsets last month’s decline of 1.3%. However, this news had little effect on the USD.
- Minutes from the last Fed meeting may offer insights into the central bank’s monetary approach, but the main event will be the delayed release of September’s nonfarm payrolls on Thursday.
Technical Analysis: EUR/USD Pressure
The technical outlook for EUR/USD remains largely unchanged. The currency pair is still fluctuating below the 1.1600 mark amid a bearish trend initiated from 1.1650. Any signs of recovery around the weekly lows near 1.1570 appear weak, as technical indicators remain bearish.
The 4-hour Relative Strength Index (RSI) is situated below 50, while the Moving Average Convergence Divergence (MACD) shows a red histogram, though the MACD line has plateaued, hinting at waning bearish momentum.
Tuesday’s low stands near 1.1570, and should the market fall below this, it could target the lows from November 7, 10, and 11 within the 1.1535-1.1545 range, as well as the November 5 low near 1.1470. Conversely, if it climbs above Tuesday’s high around 1.1610, bulls will face resistance near the upper end of the bearish channel at approximately 1.1635, with further attention on the highs from October 28 and 29, around 1.1670.
