- Following dovish comments from ECB’s Centeno, the euro slipped below 1.1750.
- Robust US unemployment claims and manufacturing data helped boost the US dollar.
- Political unrest in France continues to exert pressure on the euro.
The EUR/USD continues to dip for the third consecutive day, sitting at 1.1765 as of Friday’s update, having retreated from a four-year peak surpassing 1.1900 earlier this week. Strong economic data from the US is bolstering the dollar, while in Europe, comments from ECB’s Mario Centeno and rising political tension in France are weighing down the euro.
Centeno, a member of the ECB’s governing council, stated that prolonged inflation levels under the 2% target are unsustainable for banks. He also cautioned about potential drawbacks to European economic growth, predicting more interest rate cuts could be on the way.
In France, anti-austerity demonstrations are picking up steam. Large gatherings took place in key cities on Thursday, as protestors voiced their concerns against spending cuts proposed by former Prime Minister François Beyloux, pressuring President Emmanuel Macron and new Prime Minister Sebastian Lecorne.
On another front, the US Supreme Court is set to rule on the legality of trade tariffs on November 5. This issue was a significant aspect of President Trump’s second term and has been challenged by a lower court, which argued that he exceeded his authority by invoking federal emergency laws.
Overall, the US dollar is showing a mildly positive trend thanks to a stable market sentiment and a lack of substantial economic data from both Europe and the US. However, further upward movements in the dollar may be restrained as the market anticipates more financial easing by the Federal Reserve.
Daily Digest Market Mover: Strong Data Impacts Investors, Supports US Dollar
- Recent figures from the U.S. Labor Bureau reveal a drop from 33,000 to 231,000 unemployment claims for the week ending September 12, exceeding expectations for a softer decline.
- Simultaneously, the Philadelphia Fed manufacturing survey showed a larger-than-anticipated recovery in sector activity, jumping back to 23.2 after a 0.3% contraction in January.
- While these data won’t change expectations regarding potential interest rate cuts by the Fed in October, they have lessened fears of a severe economic downturn and provided extra support for the US dollar.
- Futures markets reflect a 90% probability that the Fed will lower its rates by 25 basis points in a month, and approximately 80% expect a further cut in December. This sentiment could limit rallies in the dollar.
- Additionally, ECB Vice President Louis de Gindes emphasized that while the bank’s current monetary policy is suitable, there are significant economic uncertainties, suggesting the easing cycle may not yet be over.
Technical Analysis: EUR/USD Key support around 1.1700
With the US dollar strengthening, the EUR/USD is reversing from its four-year high. Technical indicators show a steady relative strength index at around 50 on the 4-hour chart, but it has dipped below this level, indicating bearish pressure near the 1.1750-1.1760 support range established on September 15 and 18.
The broader bullish trend’s key support lies between the lows observed at 1.1700 on September 12 and a trendline support formed from late August, currently around 1.1710. Further down, a lower target aligns with the September 11 low near 1.1660. On the upside, daytime highs reached 1.1790, with Thursday hitting almost 1.1850 and the peak on September 16 at 1.1878.
