CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD lacks firm direction as traders await Eurozone inflation data before placing fresh bets. 
• Fed Chair Jerome Powell’s hawkish remarks on Monday underpins the USD and caps the major.
• Bets for more rate cuts by the ECB contribute to keeping a lid on the pair ahead of the key data.

The EUR/USD pair struggles to gain any meaningful traction following the previous day's pullback from the vicinity of the 14-month peak – levels just above the 1.1200 mark and oscillates in a narrow band during the Asian session on Tuesday. Spot prices currently trade around the 1.1135-1.1140 area, nearly unchanged for the day as traders keenly await the release of the Eurozone inflation data before placing directional bets.

The flash version is expected to show that the Eurozone Consumer Price Index (CPI) probably fell below the European Central Bank's (ECB) 2% target in September. Against the backdrop of a fall in the German CPI to the lowest level since February 2021, a softer Eurozone CPI print will reaffirm bets for a 25 bps rate cut at the next ECB policy meeting in October. Conversely, the reaction to a higher reading is likely to remain limited amid a modest US Dollar (USD) strength, suggesting that the path of least resistance for the EUR/USD pair is to the upside. 

The Federal Reserve (Fed) Chair Jerome Powell adopted a more hawkish tone on Monday and said that he sees only two more 25 basis point interest rate cuts this year as a baseline if the economy performs as expected. Investors were quick to react and pared bets for a more aggressive policy easing by the US central bank. This, along with the risk of a further escalation of geopolitical tensions in the Middle East and a broader conflict in the region, assists the safe-haven Greenback to build on the previous day's goodish rebound from its lowest level since July 2023. 

Later during the early North American session, traders will take cues from the US economic docket – featuring the release of the ISM Manufacturing PMI and JOLTS Job Openings data. Apart from this, speeches by a slew of influential FOMC members will drive the USD demand and provide some meaningful impetus to the EUR/USD pair, which remains confined in a familiar range held over the past two weeks or so. Nevertheless, the fundamental backdrop, along with the recent repeated failures to find acceptance above the 1.1200 mark warrant caution for bulls.

• EUR/USD struggles to find fresh bids as price action holds near 1.1150.
• Key EU inflation print due early Tuesday, investors on the lookout for looming NFP.
• Fed speakers knock back early expectations of further jumbo cuts.

EUR/USD cycled familiar territory to kick off the new trading, holding north of the 1.1100 handle but failing to find any new territory on the high end. An update on pan-EU inflation figures is due early during the Tuesday European market session, on the heels of European Central Bank (ECB) President Christine Lagarde cautioning that EU inflation is likely to dip below baseline levels before ticking back up later in the year.

Preliminary Harmonized Index of Consumer Prices (HICP) inflation from across the European continent is slated for Tuesday, with the headline HICP YoY print expected to dip to 1.9% on an annualized basis from the previous print of 2.2%. Despite the cooling in overall inflation, ECB President Lagarde noted that an uptick in October’s inflation figure can’t be ruled out as central bankers grapple with outsized expectations of rate cuts from market participants. On the US side, markets will be closely watching the lead-up to Friday’s US Nonfarm Payrolls (NFP) report for September.

Several Federal Reserve officials made announcements on Monday. Atlanta Fed President Raphael Bostic emphasized the importance of the jobs market and hinted at the possibility of further rate cuts based on economic data. Bostic specified that if the non-farm payroll (NFP) jobs report shows fewer than 100K net new jobs, it could prompt the Fed to take more aggressive action.

Following Bostic's comments, Fed Chair Jerome Powell stated that investors should not anticipate additional large rate cuts unless there is a significant downturn in US economic data. This statement caused the US dollar to strengthen and led rate traders to reassess their expectations for a 50 basis points rate cut in November. Powell indicated to investors that following the substantial rate cut in September, the Fed is likely to implement two more 25 basis points rate cuts in the near term, hobbling market expectations of a follow-up 50 bps rate trim in November.

EUR/USD price forecast

Things are getting messy on the Fiber chart with the pair cycling the 1.1150 region. Bulls and bears remain equally off-balance, despite EUR/USD’s recent rebound from September’s swing low toward the 1.1000 major price handle.

Despite repeated tests into fresh highs north of the 1.1200 handle last week, Fiber remains firmly constrained in a near-term consolidation trap, even as the 50-day Exponential Moving Average (EMA) limits downside potential from just below 1.1050.

EUR/USD daily chart

The Euro (EUR) has been somewhat resilient lately despite the poor prints on Euro-area PMIs as well as increased bets on ECB to cut in October. Pair was last at 1.1187 levels, OCBC FX analysts Frances Cheung and Christopher Wong note.  

Double-top at 1.12 awaits

“OIS shows 82% probability for 25bp cut priced (vs. 46% probability 2 weeks ago). And EUR’s relative resilience can be attributed to optimism with China’s recovery after policymakers unleashed a big package of support measures. This week, focus shifts to German CPI (Mon), Euro-area CPI estimate (Tue).”

“Softer-than-expected prints should see a 25bp cut at 17 Oct meeting more or less fully priced. This may weigh on EUR. Elsewhere, there is plenty of ECBspeaks this week (about 17 officials scheduled, with Lagarde tonight) – we watch for any shift in tone on policy guidance.”

“Daily momentum is not showing a clear bias while RSI turned lower. Risks remain skewed towards the downside. Double-top pattern observed – typically associated with bearish reversal. Resistance at 1.12 (double-top). Support at 1.11 (21 DMA), 1.1030,60 levels (50 DMA, 23.6% fibo retracement of 2024 low to high). Bias to sell rallies.”

The Euro (EUR) is expected to trade in a range, likely between 1.1130 and 1.1195. In the longer run, EUR has likely entered a range trading phase, probably between 1.1060 and 1.1215, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Has to break above 1.1230 for a sustained rise towards 1.1275

24-HOUR VIEW: “We indicated last Friday, that the ‘slight increase in momentum is likely to result in a higher trading range of 1.1140/1.1205 instead of a sustained advance.’ EUR subsequently traded in a wider range than expected (1.1123/1.1202), closing slightly lower by 0.12% (1.1163). There has been no increase in either downward or upward momentum. In other words, we continue to expect EUR to trade in a range, likely between 1.1130 and 1.1195.”

1-3 WEEKS VIEW: “Our update from last Thursday (26 Sep, spot at 1.1130) is still valid. As highlighted, EUR ‘has likely entered a range trading phase, probably between 1.1060 and 1.1215.’ Looking ahead, EUR not only has to break above 1.1215 but also 1.1230 before a sustained rise towards 1.1275 can be expected.”

• EUR/USD aims to reclaim 1.1200 despite a further slowdown in price pressures in six states of Germany in September.
• ECB’s Lagarde could suggest whether the central bank will cut interest rates again in October.
• Fed’s Powell would guide about the likely interest rate cut size in November.

EUR/USD moves higher to near 1.1200 in Monday’s European trading session. The major currency pair rises despite the flash annual Consumer Price Index (CPI) data of six German states showing that price pressures have decelerated further in September. The month-on-month inflation rose at a faster pace than what market participants saw in August but was within the 0.2% bracket.

On Friday, the flash French Consumer Price Index (EU Norm) and the Spanish Harmonized Index of Consumer Prices (HICP) data also showed that price pressures grew at a slower-than-expected pace in September.

A further slowdown in inflationary pressures has prompted market expectations of the European Central Bank (ECB) to cut interest rates again in the October meeting. Investors raised their bets on Friday on another rate cut on October 17 and have now priced in about a 75% chance of a move compared with only about a 25% chance seen last week, Reuters reported. The ECB also reduced its Rate on Deposit Facility by 25 basis points (bps) to 3.5% in its policy meeting on September 12.

Going forward, the Euro (EUR) is expected to remain highly volatile as investors await the preliminary HICP data of Germany and the Eurozone for September, which will be published on Monday and Tuesday, respectively.

In today’s session, investors will also pay close attention to ECB President Christine Lagarde’s speech at 13:00 GMT, in which she is expected to provide cues about the likely interest rate cut path for the remainder of the year. 

Daily digest market movers: EUR/USD moves higher despite inflation in six states of Germany decelerating further

• EUR/USD edges higher on Monday as the US Dollar (USD) remains under pressure ahead of the Federal Reserve (Fed) Chair Jerome Powell’s speech, which is scheduled at 17:00 GMT. Investors expect Powell to provide fresh cues about the likely interest rate cut size by the Fed in the November monetary policy meeting.
• According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points (bps) in the November meeting to the range of 4.25%-4.50% is 41.6% at the time of writing. The likelihood has decreased from nearly 53.0% on Friday after the release of the United States (US) Personal Consumption Expenditures Price Index (PCE) report for August.
• The PCE price index report showed on Friday that the annual inflation decelerated at a faster pace to 2.2% from the estimates of 2.3% and July’s reading of 2.5%. This was the lowest reading since February 2021. However, its impact appeared to be offset by the annual core PCE inflation – which excludes volatile food and energy prices – that accelerated to 2.7% from the former release of 2.6%, as expected, diminishing the odds of a double-dose rate cut in the next meeting.
• Lately, Fed policymakers have become more focused on preventing job losses and an economic slowdown, with growing confidence that inflation will return to the bank’s target of 2%. To get fresh insights about the current status of the labor market health, investors will focus on a string of economic data such as JOLTS Job Openings for August, and the ADP Employment Change and Nonfarm Payrolls (NFP) data for September, which will be published this week.

Technical Analysis: EUR/USD is poised to reclaim 1.1200

EUR/USD gathers strength to recapture 1.1200 in European trading hours on Monday. The major currency pair remains firm as it holds the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological level of 1.1000. 

The upward-sloping 20-day Exponential Moving Average (EMA) near 1.1110 suggests that the near-term trend is bullish.

The 14-day Relative Strength Index (RSI) hovers near 60.00. A bullish momentum would trigger if the oscillator remains above this level.

Looking up, a decisive break above the round-level resistance of 1.1200 will result in further appreciation toward the July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones.

• EUR/USD lacks any firm intraday direction and remains confined in a multi-day-old range. 
• The mixed technical setup warrants caution before positioning for the near-term trajectory.
• Traders look to the flash German CPI for some impetus ahead of Fed Chair Powell’s speech.

The EUR/USD pair struggles to capitalize on Friday's modest rebound from the 1.1125-1.1120 support area and kicks off the new week on a subdued note. Spot prices currently trade around the 1.1160 area, nearly unchanged for the day, as traders keenly await the release of the flash German consumer inflation figures and the Federal Reserve (Fed) Chair Jerome Powell's speech for some fresh impetus. 

From a technical perspective, the EUR/USD pair remains confined in a multi-day-old trading band. Against the backdrop of the recovery from the 1.1000 psychological mark, or the monthly low, this range-bounce price action might be categorized as a bullish consolidation phase. This, along with positive oscillators on the daily chart, suggests that the path of least resistance for spot prices remains to the upside. 

That said, the recent repeated failures to build on the momentum or find acceptance above the 1.1200 round figure constitute the formation of a bearish double-top pattern and warrant some caution for bullish traders. This makes it prudent to wait for a sustained breakout through the aforementioned short-term trading range before confirming and positioning for the next leg of a directional move for the EUR/USD pair. 

In the meantime, the 1.1200 mark might continue to act as an immediate hurdle ahead of the 1.1215 region, or a 14-month peak touched last Wednesday. Some follow-through buying will be seen as a fresh trigger for bulls and lift the EUR/USD pair to the 1.1275 region, or the July 2023 high. The momentum could extend beyond the 1.1300 mark, towards the 1.1335 region en route to the 1.1375 area and the 1.1400 round figure.

On the flip side, weakness below the 1.1125-1.1120 immediate support could drag the EUR/USD pair below the 1.1100 mark, towards testing last week's swing low, around the 1.1085-1.1080 zone. The subsequent fall could expose the 50-day Simple Moving Average (SMA), near the 1.1030 zone before spot prices eventually drop to the 1.1000 mark, which if broken will shift the near-term bias in favor of bearish traders.

EUR/USD daily chart

• EUR/USD gains ground as the Fed is expected to continue its policy easing in November.
• CME FedWatch Tool suggests 42.9% odds of a 25 basis point rate cut and 57.1% odds of a 50 basis point cut in November.
• Lower inflation in France and Spain has increased the likelihood of the ECB’s rate cut in October.

EUR/USD kicks off the week by edging higher, trading around 1.1170 during the Asian session on Monday. This upside is attributed to the tepid US Dollar (USD), which could be attributed to rising expectations that the US Federal Reserve (Fed) may continue its policy easing in November.

On Friday, the US Core Personal Consumption Expenditures (PCE) Price Index for August increased by 0.1% month-over-month, falling short of market expectations of a 0.2% rise and lower than the previous 0.2% increase. This result aligns with the Federal Reserve's outlook that inflation is easing in the US economy, reinforcing the possibility of an aggressive rate-cutting cycle by the central bank. Meanwhile, the Core PCE on a year-over-year basis rose by 2.7%, matching expectations and slightly above the prior reading of 2.6%.

The CME FedWatch Tool indicates that markets are assigning a 42.9% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point increased to 57.1%, up from 50.4% a week ago.

St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates "gradually" following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, "If that were the case, then a faster pace of rate reductions might be appropriate."

Lower-than-expected inflation in France and Spain has increased speculation that the European Central Bank (ECB) may implement another interest rate cut in October. If it occurs, this would mark the third cut in the ECB's ongoing policy-easing cycle, which began in June. The ECB resumed cutting rates in September after holding them steady in July.

Furthermore, traders would likely observe a slew of economic releases from Germany scheduled for Monday, including preliminary Consumer Price Index (CPI) data for September.

Slight increase in momentum is likely to result in a higher trading range of 1.1140/1.1205 instead of a sustained advance. In the longer run, Euro (EUR) has likely entered a range trading phase, probably between 1.1060 and 1.1215, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

To trade between 1.1060 and 1.1215 mid term

24-HOUR VIEW: “Two days ago, EUR fell sharply to 1.1113. Yesterday, when EUR was at 1.1130, we highlighted that ‘the swift decline appears to be overdone, and EUR is unlikely to weaken much further.’ We were of the view that EUR ‘is more likely to trade in a 1.1110/1.1170 range.’ EUR subsequently traded in a higher range of 1.1124/1.1189, closing at 1.1176 (+0.40%). While the price action has resulted in a slight increase in momentum, this is likely to translate into a higher trading of 1.1140/1.1205 instead of a sustained advance.”

1-3 WEEKS VIEW: “We highlighted yesterday (26 Sep, spot at 1.1130) that the recent short-term upward momentum has faded, and EUR ‘has likely entered a range trading phase, probably between 1.1060 and 1.1215.’ We continue to hold the same view. Looking ahead, EUR not only has to break above 1.1215 but also 1.1230 before a sustained rise towards 1.1275 can be expected.”

• EUR/USD falls below 1.1150 as softer-than-expected inflation data from France and Spain has prompted ECB rate cut prospects in October.
• Flash French CPI (EU norm) and Spain's HICP fell below 2% year-on-year in September.
• Investors await the US core PCE inflation data on Friday for fresh Fed interest rate guidance.  

EUR/USD slumps below 1.1150 in Friday’s European session. The major currency pair faces sharp selling pressure as the Euro (EUR) declines after the flash French Consumer Price Index (CPI) (EU Norm) and the Spain Harmonized Index of Consumer Prices (HICP) data showed that price pressures grew at a slower-than-expected pace in September.

A sharp deceleration in French and Spanish inflationary pressures has prompted market expectations for the European Central Bank (ECB) to cut interest rates again in the October meeting. This would be the third interest rate cut by the ECB in its current policy-easing cycle, which started in June. The ECB reduced interest rates again in September after leaving them unchanged in July.

Annual CPI in France grew at a pace of 1.5%, sharply lower than estimates of 1.9% and the former release of 2.2%. On month, price pressures deflated at a robust pace of 1.2%, faster than expectations of 0.8%. 

In Spain, the annual HICP rose by 1.7%, slower than estimates of 1.9% and from 2.4% in August. On month, the HICP declined by 0.1%, which was expected to remain flat.

Going forward, investors will focus on the preliminary German and Eurozone HICP data for September, which will be published on Monday and Tuesday, respectively. 

Daily digest market movers: EUR/USD comes under pressure ahead of US core PCE inflation 

• EUR/USD faces selling pressure as the US Dollar (USD) rises ahead of the United States (US) Personal Consumption Expenditures Price Index (PCE) for August, which will be published at 12:30 GMT. The inflation data will significantly influence market expectations of the Federal Reserve (Fed) interest rate outlook for the last quarter of the year. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges higher to near 100.65 but has remained inside the 100.20-101.40 range for the past two weeks.
• The PCE report is expected to show that core inflation rose at a faster pace of 2.7% year-on-year from 2.6% in June, with monthly figures growing steadily by 0.2%.
• Currently, financial markets seem to be confident that the Fed will cut interest rates for the second straight time in November as inflation is on track to return to the bank’s target of 2% and policymakers are concerned over growing risks to labor demand. However, traders remain equally split over the potential rate cut size between 25 and 50 bps, according to the CME FedWatch tool.
• Next week, investors will focus on Fed Chair Jerome Powell’s speech on Monday, a slew of labor market data, and the ISM Purchasing Managers’ Index (PMI) to project the next move in the US Dollar.

Technical Analysis: EUR/USD ranges below 1.1200

EUR/USD has consolidated in a 100-pip range since Tuesday as investors look for fresh Fed-ECB interest rate cues. The major currency pair remains firm as it holds the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological support of 1.1000. 

The upward-sloping 20-day Exponential Moving Average (EMA) near 1.1110 suggests that the near-term trend is bullish.

The 14-day Relative Strength Index (RSI) edges lower below 60.00, suggesting momentum is weakening.

Looking up, a decisive break above the round-level resistance of 1.1200 will result in further appreciation toward the July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones.

• EUR/USD edges lower due to market caution ahead of US Personal Consumption Expenditures data release on Friday.
• Fed Governor Lisa Cook has expressed support for last week's 50 basis point rate cut, pointing to heightened "downside risks" to employment.
• Traders await speeches from ECB’s Philip Lane and Piero Cipollone scheduled later in the day.

EUR/USD retraces its recent gains registered in the previous session, trading around 1.1170 during the Asian session on Friday. The US Dollar (USD) receives support as traders adopt caution ahead of the US Personal Consumption Expenditures (PCE) Price Index data for August. The Fed’s preferred inflation indicator is scheduled to be released later in the North American session.

On the data front, the US Gross Domestic Product Annualized increased at a rate of 3.0% in the second quarter, as estimated, according to the US Bureau of Economic Analysis (BEA) on Thursday. Meanwhile, the GDP Price Index rose 2.5% in the second quarter.

Additionally, US Initial Jobless Claims for the week ending September 20 were reported at 218K, according to the US Department of Labor (DoL). This figure came in below the initial consensus of 225K and was lower than the previous week's revised number of 222K (previously reported as 219K).

However, the US Dollar might have received downward pressure following the dovish remarks from the US Federal Reserve (Fed) officials. Fed Governor Lisa Cook stated on Thursday that she supported last week's 50 basis point (bps) interest rate cut, citing increased "downside risks" to employment, according to Reuters.

European Central Bank (ECB) Chief Economist Philip Lane will likely to deliver the opening remarks at a conference focused on Fiscal Policy, Financial Sector Policy, and Economic Growth in Dublin, Ireland. Meanwhile, ECB board member Piero Cipollone will give a keynote speech at the "Economics of Payments XIII" conference, organized by the Austrian Central Bank.

• EUR/USD recovered ground on Thursday, sticking close to near-term highs.
• Despite recovery, Fiber remains on the south side of 1.1200.
• US PCE inflation to be the week’s key data print.

EUR/USD tuned back into the high end on Thursday, getting bolstered by a broad-market selloff in the Greenback. US data that printed better than expected helped to ease concerns of a possible economic slowdown within the US economy looming over the horizon.

The US economy still isn’t out of the woods yet, with key activity data still easing, but the hard edge of recession fears has been filed off. Friday still has one final hurdle for data-hounds to lurch over, however. US Personal Consumption Expenditure (PCE) inflation figures due during the last trading session of the week could throw a spanner in the works if they come out wildly out-of-tune with forecasts.

Across the Atlantic, pan-EU confidence indicators are also expected on Friday, but most of these indexed surveys are expected to stick close to previous figures. EUR traders will be much more interested in European Harmonized Index of Consumer Prices (HICP) inflation numbers for September, which are due next Tuesday. 

The Federal Reserve's recent decision to cut interest rates by 50 basis points raised apprehensions in global markets, with some investors fearing that the drastic move was a response to an impending economic downturn in the US. However, Fed Chair Jerome Powell clarified that the rate cut was a proactive measure aimed at supporting the US labor market, rather than a reactive response to recessionary signals.

Positive data on US Durable Goods Orders and weekly Initial Jobless Claims further reinforced the Fed's position, with both indicators surpassing expectations. The narrative of a "soft landing" for the economy remained intact. The upcoming release of the Personal Consumption Expenditure (PCE) inflation data on Friday will serve as a crucial litmus test for evaluating the impact of the recent rate cut by the Fed.

In August, US Durable Goods Orders stagnated at 0.0% month-on-month, falling short of the previous month's significant growth but still outperforming the projected contraction of 2.6%. Additionally, the Initial Jobless Claims for the week ending September 20 showed a decrease to 218K, beating the anticipated 225K and signaling a decline from the revised figure of 222K in the preceding week.

EUR/USD price forecast

Despite Thursday’s bullish bounceback, Fiber remains capped below the 1.1200 handle. Bidders are struggling to muscle EUR/USD back into the high end, but a lack of meaningful momentum in the hands of sellers is limiting options for a downside swing.

The pair remains well-bid on the north side of the 50-day Exponential Moving Average (EMA) near 1.1040, while price action still has plenty of room to move into the top end and reclaim chart paper above 1.1200.

EUR/USD daily chart

• EUR/USD moves higher after correcting to near 1.1120 as the US Dollar struggles to extend recovery.
• Fed Powell’s speech will provide cues about November's likely interest rate cut size.
• The ECB could deliver a second consecutive interest rate cut in October. 

EUR/USD edges slightly higher in Thursday’s European session after correcting to near 1.1120 on Wednesday. The major currency pair rebounds ahead of the US Federal Reserve (Fed) Chair Jerome Powell’s speech at 13:20 GMT. On Wednesday, the shared currency pair faced selling pressure after testing territory above the round-level resistance of 1.1200 as the US Dollar (USD) bounced back. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near Wednesday’s high around 101.00.

Along with Powell, seven other policymakers: Boston Fed Bank President Susan Collins, Fed Governor Adriana Kugler, Fed Governor Michelle Bowman, New York Fed Bank President John Williams, Fed Vice Chair for Supervision Michael Barr, Fed Governor Lisa Cook, and Minneapolis Fed Bank President Neel Kashkari are also lined up to speak during the New York session.

Fed policymakers are expected to provide cues about the likely interest rate action in the remainder of the year. Currently, markets expect that the Fed will reduce interest rates further by 75 basis points (bps) collectively in the remaining two meetings, according to the CME FedWatch tool. The tool also shows that the probability of the Fed announcing a second straight interest rate cut by 50 basis points (bps) in November has increased to 61% from 39% a week ago.

Meanwhile, the latest comments from Fed policymakers have indicated that they were concerned over deteriorating labor market conditions. Out of 12 members-led Federal Open Market Committee (FOMC), only Fed Governor Michelle Bowman supported beginning the rate-cut cycle gradually by a 25 bps rate cut in September.

To get cues about the current inflation status, investors will focus on the United States (US) core Personal Consumption Expenditures Price Index (PCE) data for August, which will be published on Friday. The underlying inflation data is estimated to have grown at a faster pace of 2.7% against the July print of 2.6%.

Daily digest market movers: EUR/USD rises despite uncertainty over Eurozone’s outlook

• EUR/USD rebounds to near 1.1150 as investors underpin the Euro (EUR) against the US Dollar (USD). The performance of the Euro against other major currencies is weak due to growing speculation that the European Central Bank (ECB) could cut the Rate on Deposit Facility for the second time in a row next month. This would be the third dovish decision by the ECB this year.
• On Tuesday, the comments from Dutch ECB governing council member Klaas Knot in an interview with the Dutch TV program Nieuwsuur indicated that the central bank will continue the policy-easing cycle to at least the first half of 2025 to a level between 2% and 3% saying, "I would expect us to continue to gradually reduce interest rates in the coming time, also in the first half of 2025."
• Market expectations for the ECB to reduce interest rates in October have been prompted by deepening concerns over the Eurozone’s activity growth. The Eurozone Composite PMI unexpectedly sank into contraction in September, as shown by the flash HCOB PMI report compiled with S&P Global.
• For fresh inflation status, investors will focus on the preliminary German Harmonized Index of Consumer Prices (HICP) data for September, which will be published on Monday. Signs of further slowdown in inflationary pressures would prompt market expectations of an ECB 50 bps interest rate cut, while hot figures would weaken them.
• Meanwhile, a survey from Growth From Knowledge (GFK) showed on Thursday that German Consumer Confidence improved to -21.2 in October against estimates of -21.5 and the former release of -21.9. 

Technical Analysis: EUR/USD holds key 20-day EMA

EUR/USD rebounds slightly from 1.1120 in the European trading session on Thursday. The major currency pair corrected on Wednesday from the key resistance of 1.1200. The near-term outlook of the shared currency pair remains firm as it holds the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological support of 1.1000. 

The upward-sloping 20-day Exponential Moving Average (EMA) near 1.1100 suggests that the near-term trend is bullish.

The 14-day Relative Strength Index (RSI) consolidates below 60.00, suggesting momentum is weakening.

Looking up, a decisive break above the round-level resistance of 1.1200 will result in further appreciation toward the July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones.

The Fed's Federal Open Market Committee (FOMC) has presented. And now it's the hot rumor on the market: big interest rate cuts (50 basis points instead of 25). It's being discussed for today's SNB decision, it's considered possible for the Riksbank in the future, it's an issue for the Bank of England and for Banxico as well, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

Market to be massively surprised by inflation above expectations

“The market expects Eurozone inflation of just 1.7% over the next twelve months – well below the ECB target. See figure 1 above. While market expectations probably include a risk premium, this cannot ‘explain away’ the low Eurozone inflation expectations. In particular, the fact that inflation expectations for the subsequent twelve months (1Yx1Y) are similarly low (1.77%) shows that at these prices, the market is not just concerned with insuring itself against euro area inflation by betting on low inflation in the short term. The bets on low inflation are meant seriously.”

“If US inflation is expected to remain at or around today's levels in the medium term (CPI in August 2.5%), but considerably lower in the eurozone, equally large Fed and ECB steps should be assessed differently: the ECB's steps reduce the EUR real interest rate less than the Fed's steps reduce the USD real interest rate.”

“Please note that our economists do not at all share the market's view on inflation. They expect eurozone inflation to slowly approach the 2% target, but not to undershoot it, and even to remain slightly above the target. Our medium-term EUR/USD forecast is therefore based primarily on our expectation that the market will be massively surprised by inflation above expectations.”

The Euro (EUR) is likely to trade in a 1.1110/1.1170 range. EUR has likely entered a range trading phase, probably between 1.1060 and 1.1215, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

Rangebound for the time being

24-HOUR VIEW: “We highlighted yesterday that ‘there is a chance for EUR to rise above 1.1200, but there does not appear to be enough momentum for it to reach 1.1230.’ While our view was not wrong, as EUR rose to 1.1213, the sharp drop from the high was unexpected (low has been 1.1121). The swift decline appears to be overdone, and EUR is unlikely to weaken much further. Today, EUR is more likely to trade in a 1.1110/1.1170 range.”

1-3 WEEKS VIEW: “Yesterday (25 Sep, spot at 1.1180), we indicated that ‘while the choppy swings over the past couple of days have clouded the outlook, firm short-term momentum suggests EUR could rise towards 1.1230.’ We added, ‘the upside bias is intact as long as it remains above 1.1110.’ EUR then rose to 1.1213, pulling sharply to 1.1121. Although our ‘strong support’ level at 1.1110 has not been breached yet, the short-term upward momentum has faded. EUR has likely entered a range trading phase, probably between 1.1060 and 1.1215.”

• EUR/USD gains ground around 1.1140 in Thursday’s Asian session. 
• Dovish remarks from Fed officials this week might continue to undermine the USD. 
• HSBC analysts expect the ECB to cut rates by 25 bps at every meeting from October through to April next year. 

The EUR/USD pair trades firmer near 1.1140 during the Asian trading hours on Thursday, bolstered by the weaker Greenback broadly. Several US Federal Reserve (Fed) officials are set to speak on Thursday, including Fed Chair Jerome Powell. Furthermore, the US weekly Initial Jobless Claims, Durable Goods Orders and final US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) will be released. 

Traders await fresh catalysts about how aggressive future US rate reductions would be. Many analysts see the Fed raising jumbo rate cuts again in the November meeting. “Given his comments in Jackson Hole and what we heard from him at the press conference, yes, I think Chair Powell would lean toward cutting 50 basis points again if there were further labor market weakness,” said Mr. Matthew Luzzetti, chief US economist at Deutsche Bank.

Earlier this week, Chicago Fed President Austan Goolsbee said policymakers "can't be behind the curve" if the economy is to have a soft landing. Meanwhile, Atlanta Fed President Raphael Bostic noted the US central bank needn't go on a "mad dash" to lower rates. Fed Governor Adriana Kugler said on Wednesday that she “strongly supported” the central bank’s decision last week, adding that it would be appropriate to cut rates further if inflation continues to ease as expected. Traders will take more cues from Fedspeak on Thursday. Any dovish remarks from Fed officials this week could trigger bets for another oversized interest rate cut by the Fed, which drags the Greenback lower against the Euro (EUR).

Survey data released earlier this week showed Eurozone business activity as a whole contracted sharply, triggering speculation that the European Central Bank (ECB) would cut rates again. HSBC analysts said on Wednesday it now expects the ECB to cut interest rates by 25 basis points (bps) at every meeting from October through to April next year, given weakening economic data. 

• EUR/USD fell four-tenths of a percent after flubbing the 1.12 handle on Wednesday.
• Markets pivoted into Greenback bids in the midweek market session.
• US economic data and Fedspeak to dominate market cycle for the rest of the week.

EUR/USD pulled back on Wednesday, tumbling back through the 1.1200 handle and falling into familiar near-term congestion just north of 1.1100. Fiber shed nearly half of a percent after briefly setting a new 14-month high this week.

Thursday brings an entire raft of speeches from central banks, with an appearance from European Central Bank (ECB) President Christine Lagarde, as well as talking points from ECB Executive Board Member Isabel Schnabel. Friday will follow with a full slates of consumer and business sentiment surveys for September from the pan-EU economic area.

US consumer confidence indicators fell this week as the average US consumer doesn’t share in the stock market’s exuberance over Fed rate cuts, with key confidence readings falling to their lowest levels in three years and consumer inflation expectations for the next 12 months ticking higher. This Friday will see a fresh update to US Personal Consumption Expenditure (PCE) inflation figures.

New home sales also fell in August, declining 4.7% to 716K from the previous month’s revised 751K. Meanwhile, investors will see another print of US Gross Domestic Product (GDP) growth for the second quarter, expected to hold steady at 3.0% on an annualized basis. Thursday will also bring a slew of speeches and public appearances from several Fed officials, including Fed Chair Jerome Powell.

EUR/USD price forecast

Despite notching in a quick, fresh 14-month high on Wednesday, Fiber tumbled back through the 1.1200 handle in short order, plunging back into near-term consolidation after markets pivoted back into bidding the Greenback higher. EUR/USD is still deep in bull country, trading well north of the 50-day Exponential Moving Average (EMA) near 1.1030.

EUR/USD daily chart

• EUR/USD rises to near 1.1200 as the Euro gains despite deepening worries over Eurozone economic growth.
• The ECB is expected to cut interest rates once in any of the remaining two policy meetings this year.
• The next major trigger for the US Dollar will be the US core PCE inflation data for August on Friday.

EUR/USD extends its upside to near the yearly high of 1.1200 in Wednesday’s European session. The major currency pair gains as the US Dollar (USD) remains under pressure amid an improvement in investors’ risk appetite due to China’s massive stimulus plans announcement on Tuesday in an attempt to revive their economy from growing slowdown risks. Generally, investment flows to the US Dollar get reduced in times of cheerful market sentiment.

Apart from China’s massive stimulus, increasing Federal Reserve (Fed) large rate cut bets in November has also kept the US Dollar on the back foot. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges higher on Wednesday but remains close to the yearly low of 100.20.

The CME FedWatch tool shows that the likelihood of the Fed reducing interest rates by 50 basis points (bps) to the range of 4.25%-4.50% has increased to 60% from 37% a week ago. The Fed also started the policy-easing cycle on September 18 with a larger-than-usual rate cut of 50 bps as officials were concerned over declining labor demand.

This week, the major trigger for the US Dollar will be the United States (US) core Personal Consumption Expenditures Price Index (PCE) data for August, the Fed’s preferred inflation gauge, which will be published on Friday. The underlying inflation measure is estimated to have accelerated to 2.7% from 2.6% in July.

Before the Fed’s preferred inflation gauge, investors will focus on the US Durable Goods Orders for August, which will be published on Thursday. New Orders for Durable Goods are expected to have declined by 2.6% against a robust growth of 9.8% in July. 

Daily digest market movers: EUR/USD rises as Euro performs strongly

• EUR/USD gains further to near 1.1200 in European trading hours as the Euro (EUR) performs strongly against its major peers despite growing concerns over Eurozone economic growth. Flash HCOB Composite Purchasing Managers Index (PMI), compiled by S&P Global and Hamburg Commercial Bank (HCOB) and released on Monday, unexpectedly contracted to 48.9 in September, the lowest level since January. 
• The major decline in overall business activity came from a deeper contraction in activities in the manufacturing sector in the Eurozone’s major economies. German HCOB Manufacturing PMI came in at its lowest since September 2023 at 40.3, extending its contraction for 27 months in a row. Meanwhile, the French HCOB Composite PMI also returned to the contraction phase after expanding in August due to the one-off Olympic event.
• Going forward, the Euro will be guided by market expectations for European Central Bank (ECB) interest rate cut prospects for the rest of the year. The ECB is expected to deliver one interest rate cut in any of its two meetings remaining this year.

Technical Analysis: EUR/USD rises further to near 1.1200

EUR/USD rises to near the key resistance of 1.1200 and aims to capture it in the European trading session on Wednesday. The major currency pair delivers a sharp recovery after finding strong buying interest near the 20-day Exponential Moving Average (EMA), which trades around 1.1100.

The outlook of the major currency pair would remain firm till it holds the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological support of 1.1000. 

The 14-day Relative Strength Index (RSI) moves lower to 55.00, suggesting momentum is weakening.

Looking up, a decisive break above the round-level resistance of 1.1200 will result in further appreciation toward the July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones.

Chance for the Euro (EUR) to rise above 1.1200. There does not appear to be enough momentum for it to reach 1.1230 today. In the longer run, firm short-term momentum suggests EUR could rise towards 1.1230, UOB Group FX strategists Quek Ser Leang and Peter Chia note.

EUR can rise towards 1.1230

24-HOUR VIEW: “After EUR fell sharply two days ago, we indicated that ‘the sharp drop appears to be a tad overdone, but barring a breach of 1.1150, there is room for EUR to test the 1.1080 level’. Our view was incorrect, as EUR rebounded strongly to 1.1180. Today, there is a chance for EUR to rise above 1.1200, but there does not appear to be enough momentum for it to reach 1.1230. Support is at 1.1165, a breach of 1.1145 would mean that the current upward pressure has faded.”

1-3 WEEKS VIEW: “EUR fell sharply two days ago. Yesterday (24 Sep, 1.1110), we indicated that EUR ‘is likely to edge lower, but any decline is expected to face strong support at 1.1050.’ We pointed out that ‘to maintain the momentum buildup, EUR must remain below 1.1175.’ Our view was invalidated quickly as EUR reversed and rebounded to 1.1180. While the choppy swings over the past couple of days has clouded the outlook, firm short-term momentum suggests EUR could rise towards 1.1230. EUR has to break clearly above this level before an advance to 1.1275 can be expected. The upside bias is intact as long as it remains above 1.1110.”

• EUR/USD trades in positive territory for the second consecutive day around 1.1195 in Wednesday’s Asian session. 
• A larger Fed rate cut expectation drags the USD down against the Euro. 
• ECB policymaker signaled another interest-rate cut next month cannot be ruled out. 

The EUR/USD pair extends upside to near 1.1195 on Wednesday during the Asian trading hours. The weakening of the Greenback amid rising speculation of a jumbo rate cut from the US Federal Reserve (Fed) in November provides some support to the major pair. France’s Consumer Confidence and US New Home Sales data are due on Wednesday. Also, Fed Governor Adriana Kugler is set to speak. 

The bigger-than-expected cut in interest rates by the Fed drags the US Dollar (USD) lower broadly. The US central bank cut its benchmark Federal Funds Rate by half a percentage point to the 4.75% to 5% range “in light of the progress on inflation and the balance of risks.” Investors raise their bets that the Fed will cut further rate in November. According to the CME FedWatch Tool, the markets have priced in nearly 56% possibility of a second 50 bps rate cut in the November meeting, while the odds of 25 bps stands at 44%. 

The improved risk appetite is likely to support the shared currency for the time being. However, the expectation of another interest-rate cut by the European Central Bank (ECB) or any signs of weakness in the Eurozone economy could cap the upside for the Euro (EUR) against the USD. The ECB governing council member Klaas Knot said on Tuesday that the central bank would continue to reduce the interest rates at least through the first half of 2025, to a level between 2% and 3%. Meanwhile, ECB policymaker Madis Muller noted another interest-rate cut next month cannot be ruled out, but reckons policymakers may lack sufficient data to make definitive judgments on the region’s struggling economy.