EUR/USD slides again as investors wait for postponed US economic data.

EUR/USD Weekly Overview

The EUR/USD started off the week on a weak note, hovering around the 1.1600 mark as it retreated from Friday’s peak above 1.1650. There seems to be a cautious mood in the market, as traders await some lagging economic data from the US that tends to favor the strong US dollar.

Earlier, Luis Deguindos, Vice President of the European Central Bank, expressed optimism that inflation in the eurozone would gradually align with the bank’s stability targets. However, he did highlight concerns regarding tariffs and public debt, suggesting that shifts in sentiment could pose risks. His comments didn’t do much to alleviate the euro’s downward pressure.

Meanwhile, in the United States, President Trump acknowledged rising import costs contributing to inflation and decided to raise tariffs on over 200 items, including coffee and bananas, following recent Democratic wins in local elections. Curiously, the market’s reaction to this news was rather subdued.

Later today, the European Commission will publish its economic growth forecast for the eurozone, which could provide insight for the euro ahead of the US New York Empire State Manufacturing Index and comments from various Federal Reserve officials, including Vice Chairman Philip Jefferson and others.

Market Trends: Cautious Sentiment Enhances USD

• The euro has seen a decline for two consecutive days, as investors remain reluctant to take risks while awaiting US economic data to gauge momentum and potential monetary easing by the Fed.
• Last week, Fed officials remarked on the increasing risks related to inflation and minimized worries about the labor market’s sharp downturn. Consequently, traders have lowered their expectations for a December rate cut to 43% from 60% just a week prior, and over 90% a month ago, according to CME Group’s FedWatch tool.
• In Asia, Japanese Prime Minister Sanae Takaichi’s warning about a possible military response to a Chinese attack on Taiwan has added tension and affected risk appetite, especially with China’s advice to citizens against traveling to Japan.
• Italy’s consumer price index confirmed initial estimates with a monthly inflation decrease of 0.3% in October, compared to a -0.2% drop in September; the year-on-year rate also fell from 1.6% to 1.2%.
• The upcoming New York Empire State Manufacturing Index is projected to show a slight decline in business conditions, expecting a drop to 6.1 in November from 10.7 in the previous month.
• US construction spending is anticipated to exhibit a fourth consecutive monthly decline of -0.1% in August, following a similar downturn in July, marking the beginning of several delayed macroeconomic reports this week.

Technical Outlook: EUR/USD Struggles to Escape Bearish Channel

The EUR/USD pair has been on a downward trend since last week, unable to break free from the bearish channel initiated in early October. Currently, the bearish sentiment is holding above the 1.1600 mark, although technical indicators suggest a loss of momentum.

The 4-hour Relative Strength Index (RSI) is at the critical 50 point, while the Moving Average Convergence Divergence (MACD) remains below the signal line, hinting at a potential deeper correction ahead.

During this session, the low has been around 1.1595-1.1600, with looming concerns about the November 5 low close to 1.1470, followed by the lows from November 7, 10, and 11 around 1.1535-1.1545. On the upside, trendline resistance is in the vicinity of 1.1640, with the highs from October 28 and 29 near 1.1670. For a bullish breakout and a potential reversal, the bulls will need to overcome these key levels to target the October 17 high near 1.1730.

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