EUR/USD Struggles as Fed Adopts Gradual Rate-Cut Approach
- EUR/USD remains on the backfoot near 1.0950 as the Fed is expected to follow a gradual rate-cut approach.
- US labor demand remained robust and wage growth increased in September.
- ECB’s Villeroy supported another interest rate cut on October 17.
In today’s market, EUR/USD is facing resistance near the key support level of 1.0950. The US Dollar (USD) continues to hold strong near a recent seven-week high, supported by positive US labor market data released on Friday. The US Dollar Index (DXY) is trading close to 102.50.
US Labor Market Data Boosts Dollar, Delays Rate-Cut Expectations
- The US employment report revealed a robust labor demand and increased wage growth in September.
- 254K non-farm jobs were added, surpassing estimates and the previous release.
- The Unemployment Rate fell to 4.1%, lower than expected.
This positive data has led to a delay in market expectations for the Federal Reserve (Fed) to implement a 50 basis points rate cut in November. The Fed initiated its policy-easing cycle with a 50 bps cut in September but is now reconsidering its approach due to strong economic indicators.
Additionally, concerns about inflation persist following higher-than-expected Average Hourly Earnings for September. Wage growth accelerated to 4.0% year-over-year, indicating a healthy labor market.
Euro Faces Uncertainty Amid ECB Rate Cut Speculation
- The Euro (EUR) remains vulnerable near 1.0950 due to speculation about an ECB rate cut on October 17.
- Inflation in the Eurozone is below target, prompting dovish ECB bets.
- German economic outlook is weak, with forecasts of a 0.2% contraction.
ECB policymaker François Villeroy de Galhau emphasized the need for another rate cut, citing concerns about undershooting the inflation target. Eurozone Retail Sales data also missed expectations in August, adding to the Euro’s woes.
Technical Analysis: EUR/USD Chart Patterns
EUR/USD is struggling near 1.0950 after breaking a Double Top pattern on the daily chart. The RSI indicates bearish momentum, with support expected around 1.0900. Resistance levels are at 1.1075 and 1.1200.
Euro FAQs: Understanding the Eurozone Economy
- The Euro is the currency for 19 EU countries, with the ECB managing monetary policy.
- Eurozone inflation data, economic indicators, and trade balance impact the Euro’s value.
Understanding the factors influencing the Euro’s performance can help investors navigate the volatile currency markets.