EUR/USD Movement Analysis: What to Expect Next
EUR/USD has seen a slight increase in Thursday’s European session, rebounding from the correction near 1.1120 on Wednesday. The currency pair is now heading higher, driven by various factors affecting the US Dollar’s performance. Here’s a breakdown of the current situation:
Federal Reserve’s Influence on Interest Rates
- Fed Chair Jerome Powell’s upcoming speech at 13:20 GMT will give insights into the potential interest rate cut in November.
- Markets anticipate a further 75 basis points reduction in interest rates by the Fed in the remaining two meetings.
- The probability of a second consecutive 50 basis points rate cut in November has significantly increased to 61%.
Market Sentiment and Policy Decisions
- Recent comments from Fed policymakers highlight concerns about the labor market’s conditions.
- Only Fed Governor Michelle Bowman supported a gradual rate-cut cycle with a 25 bps cut in September.
- Investors are closely watching the US core Personal Consumption Expenditures Price Index data for August to understand inflation status.
Eurozone Economic Outlook and ECB’s Potential Actions
EUR/USD’s rise is also influenced by the uncertainty surrounding the Eurozone’s economic prospects and the European Central Bank’s potential actions in the near future. Here’s what you need to know:
ECB’s Interest Rate Cut Speculation
- There are growing speculations that the ECB might cut the Rate on Deposit Facility for the second time in October.
- The recent Eurozone Composite PMI dropping into contraction in September has fueled expectations of an interest rate cut.
- German Harmonized Index of Consumer Prices data for September will provide insights into inflationary pressures and potential ECB actions.
Market Confidence and Consumer Sentiment
- German Consumer Confidence improved in October, indicating some positive sentiment despite economic uncertainties.
- Market expectations are closely tied to the ECB’s future policy decisions and economic indicators from the Eurozone.
Technical Analysis: Key Trends for EUR/USD
Looking at the technical analysis for EUR/USD, here are some key points to consider:
- The currency pair has rebounded from 1.1120 and corrected from the key resistance level of 1.1200.
- The upward-sloping 20-day Exponential Moving Average near 1.1100 indicates a bullish trend in the near term.
- The 14-day Relative Strength Index suggests weakening momentum, but the outlook remains positive.
Overall, a break above 1.1200 could lead to further appreciation, while support levels are seen at 1.1000 and 1.0950.
Understanding the Euro: FAQs
For those new to the world of finance, here are some frequently asked questions about the Euro and its impact:
- What is the Euro? The Euro is the currency used by 20 European Union countries in the Eurozone, with significant global trading volume.
- Role of the ECB: The European Central Bank manages monetary policy and interest rates to maintain price stability and stimulate growth.
- Economic Indicators: Key data releases and economic indicators impact the Euro’s value, including inflation, GDP, and trade balance.