The Euro's (EUR) bearish momentum against the US Dollar (USD) intensified on Thursday, with the EUR/USD pair slumping to weekly troughs near the 1.0530 level by the European midday. This decline coincided with European stocks opening with notable losses, reflecting a broader sentiment of uncertainty in the markets. On the flip side, the US Dollar (USD) exhibited renewed strength, with the USD Index (DXY) approaching the crucial 107.00 threshold. This resurgence in the Greenback starkly contrasts with the marginal fluctuations witnessed in US yields across varying tenures.
Monetary Policy Speculations Gain Steam
Market speculators are currently weighing the Federal Reserve's potential monetary actions, especially as they anticipate unchanged interest rates in its November 1 meeting. Federal Reserve Chair, Jerome Powell's recent address at the Economic Club of New York on October 19 fortified this viewpoint.
In the European context, speculations are rife about the European Central Bank (ECB) possibly halting its tightening policy.
Despite inflation figures surpassing the ECB's benchmarks, and increasing apprehensions regarding potential economic stagnation in the Eurozone, the consensus is leaning towards the ECB maintaining its interest rates in the forthcoming session. If validated, this would mark a deviation from ten successive rate increases.
Key Data Releases Awaited
Market participants eagerly await several crucial US data releases. Foremost among them is the flash Q3 GDP Growth Rate, closely trailed by statistics on Initial Jobless Claims, Pending Home Sales, Durable Goods Orders, and the preliminary Goods Trade Balance.
Notable Market Developments
- The Euro's descent against the USD accelerates, furthering concerns.
- Yields in both the US and Germany experience a wide-ranging dip.
- December might still witness a 25 bps rate elevation by the Fed.
- The ECB's upcoming meeting is speculated to mark a prolonged hiatus in rate adjustments.
- Persistent geopolitical tensions in the Middle East are a cause for concern.
- The USD/JPY crossing the 150.00 benchmark sparks intervention speculations.
- All eyes will be on ECB's President Christine Lagarde's subsequent press briefing.
- Upcoming US GDP statistics might underscore the economy's continued fortitude.
Technical Analysis Insights
As the EUR/USD pair inches closer to the 1.0500 region, several key levels emerge as pivotal. If the bearish tide persists, potential support may be found around October's low of 1.0495, succeeded by the 2023 low of 1.0448 recorded early that month. Breaching these levels could drive the pair down to 1.0290 and 1.0222, lows noted in late 2022.
Conversely, if the bulls regain their footing, an initial resistance could be around 1.0694, a recent high. This threshold is buttressed by the 55-day Simple Moving Average (SMA). Overcoming this could set sights on the 1.0767 high from September 12, followed by the significant 200-day SMA at 1.0813. Any further northward movement might target the August highs near 1.0945, then 1.1000, and even reach 1.1064, and potentially 1.1275— the peak in 2023.
However, as long as the EUR/USD hovers below the 200-day SMA, bearish pressures could dominate the narrative.
