EUR/USD Experiences Continued Decline
The EUR/USD pair has recorded its second day of losses on Tuesday, trading slightly below 1.1560 after previously hitting a two-month low of 1.1542 earlier in the session. The euro’s decline appears linked to a risk-averse sentiment driven by renewed worries surrounding the US-China trade war, while Germany’s ZEW business confidence index didn’t manage to boost investor confidence.
Concerns over the trade relationship between the United States and China flared up again on Tuesday after reports surfaced that both countries had raised shipping rates on each other’s vessels. Any earlier optimism regarding a possible easing of tensions faded when US Treasury Secretary Scott Bessent disclosed that President Trump is slated to meet with Chinese President Xi Jinping.
On the German front, the ZEW Business Confidence Index indicated a slight improvement in October, though it still fell short of market forecasts. Sentiment regarding current economic conditions deteriorated to its lowest point since May. Just earlier, statistics from Destatis revealed that Germany’s consumer inflation rate matched initial estimates, climbing from 2.2% in August to 2.4% in September. This news further pressured the euro.
The economic landscape in the United States seems weak, largely due to a data blackout caused by the federal government’s shutdown. Federal Reserve Chairman Jerome Powell is set to address the public later today, but without substantial data to frame his remarks, it’s unlikely he will alter market expectations around upcoming rate cuts in the Fed’s next two meetings.
Daily Market Highlights: USD Gains Amid Trade War Tensions
- Market optimism surrounding a less aggressive US approach to China was extinguished following reports of increased freight rates for US-bound cargo from China. This move could escalate trade tensions even further.
- Amid growing scrutiny, Chinese officials have accused the US of employing double standards, with the Commerce Department arguing that the US cannot pursue dialogue while simultaneously threatening new tariffs.
- This situation follows China’s recent decision to impose restrictions on rare earth exports to the West, prompting President Trump to threaten 100% tariffs on Chinese imports starting November 1. This announcement unsettled financial markets and led to a significant dip in the US dollar last Friday.
- From a macroeconomic perspective, Germany’s ZEW Business Confidence Index rose from 37.3 in September to 39.3 in October. However, contrary to expectations for a moderate improvement in the current situation index—even falling from -76.4 to -80.0 instead. Additionally, Eurozone economic sentiment dipped from 26.1 to 22.7, diverging from forecasts of an increase to 30.2.
- German CPI data released on Tuesday reflected a year-on-year rise of 0.2% and a rate of 2.4% in September, up from 0.1% and 2.2%, respectively, in August. This aligns with earlier estimates from the Harmonized Index of Consumer Prices (HICP).
- Although a gradual improvement in Germany’s ZEW business confidence index is anticipated, indicators reflecting the current economic climate remain historically low.
Technical Analysis: EUR/USD Faces Bearish Pressure
The EUR/USD pair struggled to regain the 1.1600 mark on Monday, maintaining a weak outlook. Technical indicators on the 4-hour chart reflect ongoing bearish momentum, with the Relative Strength Index (RSI) remaining below the neutral threshold of 50, and the Moving Average Convergence Divergence (MACD) attempting to drop below the signal line.
Support at Monday’s low of 1.1542 appears bearish; buying attempts continue to meet resistance. Looking further down the line, traders will be tracking the August 5 low at 1.1530 and the base of the descending channel around 1.1525.
On the upside, the session’s high is marked at 1.1590, surpassing Monday’s peak of 1.1630. If conditions improve, the upper boundary of the descending channel is expected to be seen near the 1.1680 area.
