- The Euro is showing some strength around the 1.1725 mark, likely influenced by worries over potential government shutdowns in the US.
- President Trump is set to meet with Congressional leaders just a day before the deadline, hoping to avert a shutdown.
- From a technical standpoint, the currency pair has maintained a bearish trend since reaching a high of 1.1920.
EUR/USD is expected to hover around 1.1725 during the European trading session, having bounced back from a low of 1.1645 last week, indicating a moderate buying interest on Monday. Despite the Eurozone sentiment data not encouraging investors, anxiety over a nearly inevitable US government shutdown and speculation about possible Federal Reserve rate cuts are keeping the US dollar under pressure.
In Europe, the Commission’s consumer sentiment index vindicated a marginal rise from earlier forecasts, though it remains below historical averages, pointing to economic uncertainty affecting Eurozone consumers. Moreover, industrial confidence fell short of expectations, with service sentiment dropping even further.
The spotlight on Monday is on President Trump as he engages with both Republican and Democratic representatives in what appears to be a last-ditch effort to prevent a government shutdown on Wednesday, which marks the start of fiscal year 2026. However, given the significant divide between party views, any last-minute agreement seems unlikely, instilling fears it could push back the release of the important non-farm payroll report later in the week.
Later, various European Central Bank (ECB) officials will share insights that may influence the Euro’s outlook, while more hints about US monetary policy could come from Fed officials during the US trading session.
Daily Digest Market Mover: US Dollar Weighed Down by Shutdown Fears
- The looming prospect of a US government shutdown is likely to dominate discussions on Monday, putting stress on the dollar. With not much other macroeconomic data on the horizon, attention is shifting to Trump’s meetings with bipartisan Congressional leaders, occurring just 24 hours before the shutdown deadline.
- The US Treasury yields have retreated from their recent peaks. The benchmark 10-year note has eased down five basis points from last week’s high of 4.2%, while two-year notes have similarly dropped from 3.67% to 3.63% in early European trading.
- Comments from Federal Reserve President Cleveland, Beth Hammack, reinforced the necessity for tight monetary policy amid inflation risks, yet this didn’t significantly boost the US dollar ahead of Monday.
- In the Eurozone, the final consumer confidence measure reported a slight increase from -15.5 in August to -14.9 in September. However, industrial confidence remained stagnant at -10.2, while service sentiment slid to 3.6 in September, slightly missing the forecast of 3.7.
- Later on, ECB committee members, Joachim Nagel, Isabelle Schnabel, and Philip Lane, are expected to discuss the bank’s proactive measures amidst uncertain conditions and emphasize acting based on incoming data.
- Meanwhile, the US will be looking out for speeches from various Fed officials, including Governor Christopher Waller and other regional Presidents.
- On Friday, the US Personal Consumption Expenditures Price Index confirmed expectations of steady inflation, maintaining the prospects of ongoing Fed rate cuts. Data revealed that annual inflation in August was at 2.7%, up from 2.6% in July, while core inflation aligned with expectations, rising at 2.9% per annum.
Technical Analysis: EUR/USD Eyes Resistance at 1.1730 and 1.1760
The EUR/USD has shown some upward movement on Monday, although its technical indicators on the 4-hour chart present mixed signals. The Moving Average Convergence Divergence (MACD) indicates bullish crossovers, whereas the Relative Strength Index (RSI) struggles to breach the critical 50 threshold. This could imply that any upward trend might be weak. Following a drop below the ascending trendline last week, there may be signs of a trend reversal with a potential short recovery before further declines.
The lowest point on September 19 was around 1.1730, and the price reached 1.1765, serving as resistance ahead of the descending trendline. If the pair breaks these levels, it might indicate a shift away from immediate bearishness, redirecting focus to highs from September 23 and 24 at around 1.1820.
On the bearish side, support sits in the 1.1645-1.1455 range, which held up last week. Other critical target levels are the lows around 1.1610 and further down at 1.1575 from late August.
