During the North American trading session, the EUR/USD declined by 0.31%, with the U.S. dollar gaining strength as President Trump eased his harsh stance on China. The pair is currently at 1.1599, down from a peak of 1.1655.
Dollar Rises as Trump Signals Trade Dialogue with Xi, Filling Investors with Hope over Government Shutdown
Without much economic data emerging from the U.S., and with indications that the government shutdown might continue, the euro seems to be at a standstill. The U.S. Dollar Index (DXY), which measures the dollar’s performance against six major currencies, has risen by 0.37% to 98.95. White House economic adviser Kevin Hassett mentioned that the shutdown could potentially resolve “as soon as this week.”
Senate Minority Leader Schumer reached out to Democratic House Minority Leader Jeffries and President Trump on Tuesday to discuss negotiations aimed at possibly reopening the government.
In a different context, news about Trump planning a meeting with Chinese President Xi Jinping next week has also lifted the dollar. This meeting aims to advance trade discussions ahead of the second 90-day ceasefire, which concludes on November 10.
While there are no significant U.S. economic data releases on Wednesday and Thursday, the Bureau of Labor Statistics is set to publish its September inflation report. In Europe, market participants are keenly awaiting speeches from European Central Bank (ECB) leaders, including Vice President Luis Deguindos and President Christine Lagarde.
Daily Market Movements: Euro Weakens as Traders Await New Developments
- Traders are looking forward to the U.S. CPI release as the Federal Reserve’s policy decision approaches next week. The Fed is expected to lower interest rates by 25 basis points (bps) to a range of 3.75% to 4%, with speculation of an additional 0.25% cut at the December meeting.
- Philip Lane, chief economist at the ECB, indicated that eurozone banks might face challenges if dollar funding becomes scarce due to Trump’s policies. Dollar funding has been a concern since the announcement of trade tariffs.
- The ECB is anticipated to maintain its current interest rates in the upcoming meeting, with a likelihood of 98%.
- Moreover, the unresolved Russia-Ukraine conflict may add pressure on the euro, despite Trump’s attempts to facilitate a deal between Russian President Putin and Ukraine’s Zelensky.
Technical Outlook: EUR/USD Hovers Around 1.1600, Further Declines Expected
From a technical perspective, the outlook for EUR/USD has seen a slight improvement but continues to appear bearish to neutral, staying below the 100-day simple moving average (SMA) of 1.1654. Last Friday, the Relative Strength Index (RSI) dipped below 50, signaling increasing bearish momentum.
Key support levels are at 1.1600, with additional support at 1.1550 and 1.1500. A significant drop below those levels could take the pair down to the cycle low of 1.1391 from August 1. Conversely, resistance is noted at 1.1650 and 1.1700, with a sustained rise above the latter potentially leading to targets of 1.1800 and the July 1 high of 1.1830.
