The Current State of EUR/USD: A Comprehensive Analysis
EUR/USD Reaction to Eurozone PMIs and Dovish Fed Expectations
- EUR/USD attracts some dip-buyers following Monday’s dismal Eurozone PMIs-inspired slide.
- Dovish Fed expectations prompt fresh USD selling and offer some support to the currency pair.
- The upside seems limited as traders are likely to wait for more cues about the Fed’s rate-cut path.
The EUR/USD pair has seen a slight uptick on Tuesday after a significant decline driven by disappointing Eurozone PMI data. This data indicated a contraction in business activity, with the Eurozone Composite PMI dropping to 48.9 in September, largely influenced by Germany and France. The anticipation of a 25 bps rate cut at the ECB’s October meeting weighed on the Euro, leading to its largest daily fall against the USD in over three months.
Conversely, the US Composite PMI remained steady in September at 54.4, with a rise in average prices suggesting potential inflation acceleration. Although this supported the USD, dovish expectations for aggressive Fed policy easing restrained significant USD gains, aiding the EUR/USD pair’s recovery. Market participants are pricing in another substantial rate cut at the November FOMC meeting, reflecting a cautious sentiment towards the USD.
Influential FOMC Members’ Comments and Global Equity Markets Impact
- Minneapolis Fed President Neel Kashkari shifts focus to lower inflation risks and labor market concerns.
- Atlanta Fed President Raphael Bostic acknowledges stable price conditions but highlights labor market risks.
- Chicago Fed President Austan Goolsbee emphasizes the need for rate adjustments to support the labor market.
Moreover, bullish market sentiment globally, coupled with Fed rate cut speculations, weakens the USD as a safe-haven asset, favoring the EUR/USD pair. Traders are cautious and await further Fed signals before taking definitive trading positions. Eyes are on upcoming US economic data releases and speeches by Fed officials for short-term market cues.
Technical Outlook for EUR/USD
Technically, the EUR/USD pair faces resistance near the 1.1165-1.1170 zone, followed by the YTD peak at 1.1200. A clear break above this level could signal bullish momentum. Oscillators on the daily chart, while losing some strength, maintain a slight positive bias, indicating a possible continuation of the recent uptrend.
On the downside, support lies at 1.1100, with the 1.1085-1.1080 range as immediate barriers. Further decline may test the 50-day SMA around 1.1020, with a break below 1.1000 suggesting a reversal in the pair’s trend. Deeper losses could target the 1.0950-1.0940 region.
EUR/USD Daily Chart
