Daily Technical Analysis by OnEquity

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Daily Technical Analysis EUR/USD: Indecision Dominates Trading

The EUR/USD pair held steady on Tuesday, unable to regain the 1.1000 level but pausing the recent Fibonacci retracement from the 1.1200 area. The euro, which had seen losses after hitting a one-year high in late September, is again falling toward the 1.0950 zone, as the dollar strengthened across the board.

European data has been largely tepid this week, and with the European Central Bank expected to raise rates next week, the economic calendar will be filled with important data releases.

On Wednesday, the latest minutes of the Federal Reserve’s September meeting will be released, which will provide plenty for dollar traders to analyze. Markets were expecting a 25 basis point rate cut in November after the Fed signaled a potential pause in tightening during its September meeting. However, continued core inflation above the Fed’s target along with U.S. jobs numbers, which markedly beat estimates the previous week, have halted hopes for a rate cut.

According to the CME’s FedWatch tool, rate markets see about a 90% chance that the Fed will make a 25 basis point rate cut on November 7. Fed officials have indicated that a significant weakening in the U.S. labor market would be necessary for additional rate cuts.

Thursday’s U.S. inflation report will be the focal point of the week for the Forex market, as it will determine how market sentiment evolves in line with estimates of a rate cut by the Fed. A lower-than-expected reading would boost hopes that the Fed will cut interest rates at least twice more in the remainder of the year, which could weaken the dollar against the euro.

Markets are estimating a figure of about 2.3% year-on-year and 0.1% month-on-month. Any result above this is expected to be strong. Any data above this figure could push back estimates of a rate cut and could cause the euro to struggle to end the week. Other risks contributing to the euro’s decline against the dollar include ongoing concerns over tensions in the Middle East. Israel has also promised a forceful response to last week’s missile attack by Iran. The size and nature of the attack could be considerable, driving demand for safe-haven currencies such as the USD, JPY, and CHF.

EUR/USD Daily Technical Analysis for October 9th:

The EUR/USD appears to be on the verge of entering a sideways phase as the daily candlesticks are establishing a consolidation pattern. The pair is trading between the 50-day and 200-day Exponential Moving Averages (EMA), with buyers attempting a recovery after EUR/USD pulled back from above the 1.1200 area.

If sellers have run out of momentum, euro bulls may challenge the 200-day EMA near 1.0900, although a prolonged decline could push prices back to the 2024 lows near 1.0600.

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Daily Technical Analysis EUR/USD: The Pair Extends Decline Ahead of ECB Rate Decision

The EUR/USD pair continued its bearish trend on Tuesday, dropping about one-fifth of a percent and sliding below the 200-day Exponential Moving Average (EMA). The price closed below the 1.0900 level for the first time since early August. The pair is now down nearly 3% from its late September highs, which were just above the 1.1200 level.

European banks have generally reported negative impacts following the European Central Bank’s (ECB) summer rate cut. While lending standards have remained broadly unchanged and even eased for household lending, consumer credit conditions remain tight. The rebound in demand for housing loans is based solely on the expectation of further rate cuts, which means consumers are over-leveraged in the short term. Additionally, EU banks’ net interest income, due to the ECB’s policy rate decisions, has turned negative for the first time since 2022.

At a broad level, the ECB is expected to announce a quarter-point cut to the main deposit rate in its next decision on Thursday. Markets widely anticipate a 25-basis-point rate cut, with the ECB’s main refinancing rate also expected to be reduced by nearly 25 basis points to around 3.4%, down from 3.65%.

In addition to the ECB’s decision, Thursday’s session will include the release of U.S. retail sales data for September. U.S. retail sales are expected to show a 0.3% month-over-month increase, up from 0.1% in the previous month.

However, despite the euro’s weakness against the U.S. dollar and the anticipated downward momentum, it’s worth noting that the U.S. dollar has recently been losing steam. The U.S. side of the equation, which has undoubtedly been the dominant force in the currency pair’s decline, should not be overlooked. In fact, the U.S. dollar rebounded in October as markets adjusted their expectations for interest rate cuts in 2024, following stronger-than-expected U.S. economic data. Clearly, the U.S. economy does not require an urgent pace of rate cuts. Moreover, the delay in rate cuts has boosted U.S. bond yields and strengthened the dollar.

EUR/USD Daily Technical Analysis for October 16th

The EUR/USD exchange rate is expected to test the 200-day moving average as sellers anticipate Thursday’s ECB rate cut. The expectation of further ECB action has pushed the EUR/USD pair below the 1.10 level, with the next key target being the 200-day moving average at 1.08736.

There is a high likelihood that this level will be tested sometime before the end of October. From this expected support level, technical indicators could begin to move toward oversold territory. On the daily chart, the most significant support will be found at the 1.0775 level. Conversely, within the same time frame, the current bearish channel would not be broken without a return to the vicinity of the 1.1070 resistance level.

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Daily Technical Analysis EUR/USD: Approaching 1.0850, Potential Drop Amid Shifting Political Forecasts

The EUR/USD may face challenges due to shifts in market estimates regarding monetary policy and interest rate outlooks.

Currently, the U.S. dollar has gained ground as the likelihood of a rate cut by the hawkish Federal Reserve in November diminishes. Meanwhile, the European Central Bank is expected to intensify its monetary policy easing to boost economic growth in the eurozone.

The EUR/USD is showing signs of stability after the previous session’s gains around the 1.0860 level in Asian trading on Monday. Earlier expectations of a 50 basis point rate cut by the Federal Reserve next month have dissipated with the latest data revealing the resilience of the U.S. economy.

According to CME’s FedWatch tool, the probability of a 25 basis point rate cut in November has increased to 99.3%, up from 89.5% last week. U.S. retail sales rose 0.4% month-over-month in September, surpassing the 0.1% increase in August and exceeding market expectations of a 0.3% rise. Additionally, initial jobless claims dropped by 19,000 during the week ending October 11, marking the largest decline in three months. The total number of claims fell to 241,000, significantly below the estimated 260,000.

Research from Rabobank indicates that the market is interpreting recent comments from ECB officials as a sign that they are increasingly comfortable with Eurozone inflation estimates. Consequently, the European Central Bank appears to be shifting its focus toward supporting growth in the region. This has fueled speculation about the possibility of a faster pace of easing, including the potential for a larger 50 basis point interest rate cut. Such a move could put pressure on the euro and weigh on the EUR/USD pair.

The euro came under downward pressure following the European Central Bank’s recent decision to cut interest rates by 25 basis points. This move follows a significant decline in inflation, which peaked at 10.6% in October 2022 and has since dropped to 1.7% in September, now below the ECB’s 2% target.

EUR/USD Daily Technical Analysis for October 21st:

The EUR/USD pair has been in a strong downtrend in recent days. It has dropped from 1.1200, its year-to-date high, to 1.0855, its lowest point since August 2.

The pair has turned the support level at 1.0980, the high from March 8, into resistance. It has also fallen below both the 50-day and 200-day moving averages.

Meanwhile, the Relative Strength Index (RSI) and Percentage Price Oscillator (PPO) have continued to decline. As a result, the pair is likely to continue falling, with the next key level to watch being 1.0770. This price level aligns with the lowest swings since October 3 of the previous year.

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Daily Technical Analysis EUR/USD: The Pair Rises Ahead of U.S. Elections

The EUR/USD recovered some losses from the previous session, trading near 1.0880 in early Asian trading on Monday. This rise may be due to a softer U.S. dollar following weaker-than-expected October Non-Farm Payrolls data. However, uncertainty surrounding the U.S. presidential election could drive safe-haven demand, limiting the pair’s upside potential.

On Friday, U.S. Bureau of Labor Statistics data showed that NFP for October increased by only 12,000, following a revised September gain of 223,000, well below market estimates of 113,000. The unemployment rate remained steady at 4.1% in October, aligning with consensus forecasts.

According to a recent New York Times poll cited by Reuters, Democratic candidate Kamala Harris and Republican candidate Donald Trump are locked in a close race across seven key states just days before the presidential election. The poll indicates Vice President Harris has a slight lead in Nevada, North Carolina, and Wisconsin, while former President Trump leads narrowly in Arizona. The candidates are in a tight race in Michigan, Georgia, and Pennsylvania, with results within the poll’s 3.5% margin of error.

The euro was bolstered by stronger-than-expected economic growth in the third quarter and higher-than-expected inflation in the eurozone. This has led traders to revisit expectations for a larger-than-usual rate cut by the European Central Bank in December. Markets have fully priced in a 25 basis point cut to the ECB’s December deposit rate, marking the fourth cut this year after similar reductions in October, September, and June.

Preliminary data revealed the Eurozone’s Harmonized Index of Consumer Prices rose to 2.0% y-o-y in October, up from 1.7% previously and exceeding the 1.9% estimate. The annual core inflation rate remained stable at 2.7%. Additionally, the Eurozone’s GDP grew by nearly 0.4% quarter-on-quarter in the third quarter, more than doubling the second-quarter growth and surpassing estimates of 0.2%.

EUR/USD Daily Technical Analysis for November 4th:

The euro market has rebounded slightly over the week, though it appears to be struggling to hold onto gains. Expect the market to remain volatile and range-bound around the 50-week EMA. A break above the top of the recent candle could push the market toward the 1.10 level. Conversely, the 1.0750 level serves as a critical support level to watch closely. Should it break below this level, the market may head toward 1.05, which has been a significant support level multiple times over recent years. In short, this market seems to lack clear direction and remains somewhat uncertain.

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Daily Technical Analysis: EUR/USD Stays Tepid Near 1.0700 Amid Rising Dollar and Political Uncertainty

The EUR/USD pair remains under significant pressure, primarily driven by the strengthening U.S. dollar and escalating political uncertainty in Germany. The prospect of Donald Trump’s return to the White House has raised expectations of higher U.S. tariffs and lower corporate taxes, policies that could elevate inflation risks and push the Federal Reserve toward a more hawkish stance.

Impact of Trump’s Fiscal Policies

Trump’s proposed fiscal policies, such as increased import tariffs and corporate tax reductions, are expected to stimulate investment, spending, and labor demand. Analysts suggest that such policies could lead to higher inflation, forcing the Federal Reserve to adopt a more restrictive monetary policy. A tighter Fed stance would likely bolster the U.S. dollar, exerting further downward pressure on EUR/USD.

Despite these projections, Fed Chairman Jerome Powell recently stated that Trump’s presidency would not influence the Federal Reserve’s policy decisions immediately. Powell emphasized the Fed’s data-driven approach, noting after a 25 basis-point rate cut last Thursday, “We don’t guess, speculate, or assume what the government’s future policy decisions will be.” The rate cut places the Fed’s benchmark interest rate in the 4.50%–4.75% range.

The University of Michigan’s Consumer Sentiment Index rose to 73.0 in November, up from 70.5 in October, surpassing market expectations of 71.0. This improvement reflects robust consumer confidence, further strengthening the dollar.

Political Instability in Germany

In Germany, political turmoil continues as Chancellor Olaf Scholz dissolved the ruling coalition, dismissed the Finance Minister, and appointed a new one. These developments have heightened calls for early elections to restore stability, adding to the euro’s struggles.

Analysts at Deutsche Bank highlight that potential U.S. tariffs could harm the eurozone’s export sector, compounding economic uncertainty. They note, “Uncertainty is high on many levels, from the exact impact of U.S. tariffs to the timing of their implementation, to how and when Europe responds.”

EUR/USD Daily Technical Analysis for November 11th:

From a technical perspective, the EUR/USD trades approximately 200 pips below its November high of 1.0936, with technical readings indicating a bearish outlook. On the weekly chart, the pair is pressured by a flat 20 simple moving average, while the 100 SMA remains directionless. The 200 SMA shows growing bearish momentum, reinforcing the negative sentiment. Indicators on the chart are pointing decisively downward, suggesting the potential for further declines.

The daily chart confirms this bearish trend, with the pair unwinding below all moving averages. The 20 SMA has a pronounced downward slope, offering resistance around 1.0830. Indicators on the daily chart are consolidating below their midlines, adding to the bearish sentiment.

Support levels are observed at the weekly low of 1.0681, with the year’s low of 1.0600 serving as a critical barrier. A break below this level is considered unlikely but could lead to further declines toward the 1.0530/40 price zone if it occurs. Resistance levels are seen in the 1.0800–1.0830 range, followed by 1.0900.

In summary, the EUR/USD remains under significant pressure due to a strengthening dollar and heightened political uncertainty in Germany. While immediate support and resistance levels provide some guidance, the pair’s trajectory is heavily dependent on fundamental developments, particularly regarding U.S. fiscal policies and eurozone economic stability. For now, the outlook remains bearish, with sellers maintaining control.