The EUR/USD exchange rate managed to recover some of the losses it incurred last week. Currently, it’s trading below 1.1530 after bouncing back from 1.1490 on Friday, bolstered by a calm start to the week that seems to be enhancing risk appetite. Although business confidence took a hit in November, as reported by Germany’s Ifo data, the euro hasn’t felt a significant impact just yet.
Market sentiment remained positive on Monday, largely thanks to dovish remarks from John Williams, the President of the New York Federal Reserve. His comments reignited investors’ hopes for potential interest rate cuts in the upcoming months, which pushed the U.S. dollar index (DXY) lower from its multi-week highs.
When looking at macroeconomic indicators, the preliminary figures of the U.S. S&P World Purchasing Managers’ Index (PMI) and the Michigan Consumer Confidence Index for November appeared more favorable. This contrasts with Eurozone PMI data, which unexpectedly reported a contraction in manufacturing activities.
Daily digest of market moves: Euro increases risk appetite
- The euro (EUR) managed to recover some ground on Monday, aided by a moderate risk appetite as European stock markets surged. Even though the macroeconomic indicators aren’t particularly encouraging, hopes for a peace deal in Ukraine might be lifting investor spirits.
- Earlier today, the German IFO business confidence index dropped to 88.1 in November from October’s 88.4, contrary to expectations for a small increase to 88.5. While the current situation index improved slightly, the overall economic expectations dipped from 91.6 in October to 90.6 in November.
- The preliminary HCOB PMI for the eurozone, released on Friday, highlighted an unexpected drop to 49.7 from last month’s 50, defying expectations of improvement to 50.2. The services PMI did edge up to 53.1 from 53.0 in October, but the composite index fell to 52.4 from 52.5.
- German manufacturing also showed signs of further contraction in November, with the preliminary HCOB manufacturing PMI decreasing to 48.4 from 49.6. The services sector also dropped to 52.7 from the prior 54.6, significantly below the forecast of 53.9, indicating weak momentum in the major economies of the region.
- In the U.S., the preliminary S&P Global Manufacturing PMI for November registered at 51.9, down from October’s 52.5 and below the expected 52.0, while the Services PMI exceeded expectations at 55.0, against a stable consensus of 54.8. Overall, the index rose from 54.6 to 54.8.
- Additionally, the Michigan Consumer Confidence Index for November saw an increase to 51 from 50.3 in October, surpassing the expected 50.5. Economic expectation measures also rose from 49 to 51.
- The positive economic data didn’t fully mute comments from Williams at the Fed, who signaled possible monetary easing “in the near term,” suggesting the Fed could cut rates further without affecting its inflation targets.
- Later, European Central Bank President Christine Lagarde is set to speak on artificial intelligence and education at a forum in Bratislava, Slovakia.
Technical analysis: EUR/USD remains bearish, with limited upside at 1.1550
EUR/USD is showing some weak recovery signs, but the overall bearish trend persists. The 4-hour Relative Strength Index (RSI) indicates it’s still below the 50 mark, and the Moving Average Convergence Divergence (MACD) is leveling off beneath zero, implying any bullish attempt may be short-lived.
The daily high stands around 1.1530, which is still below the significant 1.1550 threshold that previously supported the bulls on Thursday and Friday. For a genuine bullish movement to be confirmed, this level needs to be overcome, aiming towards the top of the descending channel from the highs seen on November 18th and 19th near 1.1600, as well as the mid-October highs around 1.1625.
On the other hand, the psychological level of 1.1500 is dangerously close and could pose challenges. If it breaks down further, the next levels to watch will be the November 5th lows near 1.1470 and the channel support around 1.1425.
