CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD may depreciate further as the US Dollar (USD) receives support from Trump trades.
• Republicans to gain significant authority to push through an expansive agenda focused on tax and spending cuts.
• The ECB may consider cutting rates to near zero by 2025 if Europe's economic growth falters due to Trump's tariffs.

EUR/USD holds ground after depreciating around 2% in the previous session, trading near 1.0740 during the Asian session on Thursday. The downside risk for the EUR/USD pair seems possible as the US Dollar (USD) may receive support from Trump trades following the victory of Republicans in the US election.

Donald Trump's Republicans appeared poised to potentially take control of both chambers of Congress, granting them significant authority for the first time in eight years to push through an expansive agenda focused on tax and spending cuts, energy deregulation, and border security.

According to Reuters, Republican lawmakers and aides indicated that early priorities would likely include extending Trump's 2017 tax cuts, funding the US-Mexico border wall, cutting unspent funds allocated by Democrats, dismantling the Department of Education, and limiting the powers of agencies such as the Consumer Financial Protection Bureau.

However, the US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, retreats from a four-month high of 105.44, recorded on Wednesday. The DXY trades around 104.90 amid a downward correction in US Treasury yields. US yields surged to their highest levels since July on Wednesday to 4.31% and 4.47%, respectively, on Wednesday.

Traders anticipate the US Federal Reserve (Fed) will lower its benchmark interest rate by 25 basis points at its November meeting on Thursday. The CME FedWatch Tool indicates a 98.1% probability that the Fed will make this quarter-point rate cut in November, showing strong market consensus for a modest reduction this week.

If Europe's growth stalls due to Trump's tariffs, the European Central Bank (ECB) may be forced to take aggressive action, potentially cutting rates to near zero by 2025, according to Euronews. Markets expect the ECB to lower the Deposit Facility Rate by the typical 25 basis points (bps) in December.

EU-based market data is relatively sparse this week. Pan-EU Retail Sales figures are scheduled for release on Thursday, with the EU leaders’ summit concluding on Friday. ECB President Lagarde is also set to make a follow-up appearance on Saturday.

• EUR/USD plummeted nearly 2% on Wednesday as markets bid up the US Dollar.
• Fiber saw one of its worst days in years as markets struggle to find a reason to buy the Euro.
• EU economic calendar remains tepid, leaving markets to focus on Fed rate cuts.

EUR/USD plummeted during the midweek market session, falling over 1.75% into the red and tumbling back below 1.0750 for the first time since July. Markets have broadly pivoted into the Greenback following clear results from this week’s US presidential election that sees former President Donald Trump as the frontrunner.

EU-based market data remains relatively limited this week. Pan-EU Retail Sales figures are due on Thursday, with this week’s EU leaders’ summit set to wrap up on Friday and a follow-up appearance from ECB President Lagarde slated for Saturday when the market will be closed.’

The US presidential election still isn’t over, and some key battlegrounds will take some time before a final call is made, but markets are confident that the outcome has been decided, with Republican candidate and former President Donald Trump set to win 276 electoral votes. With the Republicans also set to win back both the US Senate and Congress, investors are anticipating a pro-growth environment with more deregulation as well as additional or extended business tax cuts.

Another Federal Reserve (Fed) rate call looms ahead this week. Fed Chair Jerome Powell is widely expected to deliver another quarter-point cut to interest rates on Thursday, bringing the Fed Funds Rate down 25 bps to 4.75%. The Fed Funds Rate peaked at 5.5% in July of 2023, and investors have been clamoring for a return to a low interest rate environment that has become familiar territory since US interest rates clattered to an all-time low near 0% in early 2009.

The University of Michigan’s (UoM) Consumer Sentiment Index is waiting in the wings and slated for release on Friday. Investors expect November’s UoM sentiment indicator to climb to a six-month high of 71.0 from the previous month’s 70.5.

EUR/USD price forecast

The EUR/USD daily chart reveals a considerable setback, as the currency pair faced a sharp rejection around the 50-day EMA, currently at 1.0929, and has dropped below both the 50-day and 200-day EMAs. This technical pullback reflects a cautious outlook for the euro, particularly given recent challenges faced by the eurozone economy, including concerns over slowing growth and inflation. The strong bearish candlestick observed in the latest session suggests a swift return of market caution, as the euro failed to sustain momentum above critical moving averages.

Looking at momentum indicators, the MACD line is currently above the signal line, but recent weakness has caused the histogram bars to contract, reflecting a loss of upward momentum. The MACD's proximity to the zero line hints at the potential for a shift in sentiment; should the MACD cross into negative territory, it may signal a further downturn for EUR/USD. Investors appear wary, as current price action implies that upward moves are likely to face resistance amid prevailing market uncertainties, aligning with broader risk aversion.

In the event of further weakness, traders should keep an eye on the 1.0700 level, which marks a psychological support area and could be crucial in gauging future market sentiment. If EUR/USD holds above this support, it may encourage a period of consolidation as the market assesses broader economic data and policy signals. However, a break below could amplify selling pressure, potentially drawing the currency pair toward the year’s lows around 1.0600, especially if the eurozone’s macroeconomic picture remains subdued. Conversely, for a bullish scenario to re-emerge, the euro would need to reclaim the 1.0900 level with sustained buying interest.

EUR/USD daily chart 

The Euro (EUR) traded sharply lower, in response to US elections. Pair was last seen at 1.0718 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

EUR/USD is under the pressure

The sensitivity of EUR to US elections appears to have picked up by quite a fair bit. Threat of Trump tariff on all imports by up to 20% can hurt EUR as US was the largest partner for EU exports of goods in 2023.

Momentum is mild bullish but RSI fell. Resistance here at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.09 (50% fibo), 1.0940 (100 DMA). Risks remain 2- way dependent on outcome of US election results (which is still trickling as we write).

EUR/USD has experienced a deeper pullback after confirming a double top, BBH’s FX analysts note.

Potential supports are located at June low of 1.0665 and 1.0600

“EUR/USD has dipped below the 200-DMA (1.0870) and the trend line drawn since October 2023 denoting prevalence of downward momentum.”

“The decline is a bit stretched but signals of rebound are not yet visible. Inability to reclaim the MA at 1.0870 could lead to persistence in down move. Next potential supports are located at June low of 1.0665 and 1.0600.”

• EUR/USD is hit badly with Trump’s victory in the US presidential election in sight.
• The Fed is expected to cut interest rates again on Thursday but by a lower size of 25 bps.
• The Euro underperforms across the board as concerns over Eurozone economic growth have deepened.

EUR/USD slightly recovers to 1.0750 after nosediving to near 1.0700 in Wednesday’s European session, the lowest level in over four months. The major currency pair hits badly as Republican candidate Donald Trump appears to take the Senate from Democrats, with Grand Old Party (GOP) gaining an unconquered lead in key battleground states, according to The Associated Press. The agency shows that Trump is inches away from winning 270 seats, a level the party needs to cross to form the government.

Meanwhile, Trump has declared victory over Democratic rival Kamala Harris, according to Sky News.

A clear victory of Trump in sight keeps the US Dollar (USD) on the front foot. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, rallies to near 105.30. Market action clearly shows that Trump’s victory is favorable for the US Dollar, which was already anticipated as the Republican candidate vowed to hike tariffs on imports and lower corporate taxes. A scenario that will boost overall business activity and labor demand and escalate inflationary pressures. 

However, the plot is unfavorable for currencies of economies like the Eurozone, the United Kingdom (UK), China, and Canada, which are major trading partners of the United States (US). Trump’s protectionist policies will directly impact the export sector of the above-mentioned economies, which will boost the risks of an economic downturn.

Going forward, investors will also focus on the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Thursday. According to the CME FedWatch tool, traders have priced in a 25-basis point (bps) interest rate cut, pushing rates lower to the 4.50%-4.75% range. This would be the second interest rate cut by the Fed in a row. However, the rate cut size will be lower than the 50 bps announced in the September meeting.

Investors will also focus on Fed Chair Jerome Powell’s press conference to get cues about the impact of Trump’s victory on the interest rate path and the inflation outlook.

Daily digest market movers: EUR/USD is punished by upbeat US Dollar and weak Euro

• EUR/USD faces severe selling pressure due to the US Dollar’s outperformance and the Euro’s (EUR) sharp depreciation against other major currencies. The outlook of the Euro has weakened as market participants expect that the implementation of Trump’s protectionist policies will significantly damage European economic growth.
• According to the Dutch bank, Trump's tariffs would shave approximately 1.5 percentage points off European growth, translating to a potential €260 billion economic loss based on Europe's estimated 2024 GDP of €17.4 trillion.
• Should Europe's growth falter under Trump's tariffs, the European Central Bank (ECB) may be compelled to respond aggressively, slashing rates to near zero by 2025, according to Euronews.
• Trump’s victory would likely force the ECB to cut its Deposit Facility Rate by a larger-than-usual size of 50 bps in its next monetary policy meeting in December. This would be the fourth interest rate cut by the ECB this year.

Technical Analysis: EUR/USD posts fresh four-month low near 1.0700

EUR/USD slides swiftly to near the key support of 1.0700. The outlook of the major currency pair weakens as it breaks below an upward-sloping trendline around 1.0750, which is plotted from the April 16 low at around 1.0600

The declining 50-day Exponential Moving Average (EMA) near 1.0930 suggests a firm bearish trend.

Additionally, the 14-day Relative Strength Index (RSI) retreats below 40.00, suggesting a resumption of the bearish momentum.

Looking down, the shared currency pair could decline to the year-to-date (YTD) low of 1.0600. On the upside, the round-level resistance of 1.0800 will act as a key barrier for the Euro bulls.

• EUR/USD plummets to a multi-month low as the USD rallies across the board on Trump enthusiasm.
• Surging US bond yields favors the USD bulls and support prospects for further decline for the major.
• Diminishing odds for more aggressive ECB rate cuts lend support to the Euro and limit further losses.

The EUR/USD pair comes under intense selling pressure on Wednesday and dives to its lowest level since early July, around the 1.0720-1.0715 region during the Asian session. Spot prices, however, manage to recover a few pips in the last hour and currently trade just above mid-1.0700s, still down 1.50% for the day.

The US Dollar (USD) catches aggressive bids and spikes to a four-month peak amid rising odds of a victory for former President Donald Trump, which, in turn, is seen weighing heavily on the EUR/USD pair. Meanwhile, a Republican sweep could see the launch of potentially inflation-generating tariffs. This, along with deficit-spending concerns and bets for a less aggressive easing by the Federal Reserve (Fed), pushes the US Treasury bond yields sharply higher and favors the USD bulls.

In fact, the yield on the benchmark 10-year US government bond surges over 15 points at 4.44%, hitting its highest level since July 2, and validates the near-term positive outlook for the Greenback. That said, the risk-on impulse – as depicted by a strong bullish sentiment across the global equity markets, holds back the USD bulls from placing fresh bets and helps limit further losses for the EUR/USD pair amid rising bets for a less dovish European Central Bank (ECB). 

Data released last week showed that inflation in the Eurozone rose to 2% in October. Furthermore, the better-than-expected GDP growth figures from the Eurozone's largest economies suggest that the ECB will stick to a 25 basis points (bps) interest rate cut at its next policy meeting in December. This, in turn, could offer some support to the EUR/USD pair, though a sustained break and acceptance below the 1.0800 mark suggests that the path of least resistance for spot prices is to the downside.

• EUR/USD softens to near 1.0805 in Wednesday’s Asian session, down 1.06% on the day. 
• Trump trades continue to strengthen as Trump is leading in the US presidential election. 
• The ECB’s large rate cut bets diminished after upbeat Eurozone Q3 GDP growth data. 

The EUR/USD pair falls to around 1.0805 during the Asian trading hours on Wednesday. The Greenback gains momentum as the voting favoredd Former US President Donald Trump in the US presidential election. 

Polls are closing in 15 states, including the battleground states of Arizona, Michigan and Wisconsin. Trump is doing better in rural areas, while Kamala Harris is doing better in the suburbs than Biden. Trump trades continue to strengthen, supporting the US Dollar (USD) against the Euro (EUR). 

Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered Bank's New York branch, said, "Right now the mood seems to be going in favor of Trump," Englander said. "On the other hand for most of October and into the beginning of November the Trump trades were stronger dollar and higher yields,” added Englander. 

The US presidential election will be the key event for the USD dynamic this week. However, investors will shift their attention to the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Thursday.

Across the pond, the upbeat Eurozone Gross Domestic Product (GDP) data prompted traders to pare bets supporting a larger-than-usual interest rate cut in the December policy meeting. The markets expect the ECB to cut the Deposit Facility Rate again in December by a usual size of 25 basis points (bps). Investors will keep an eye on the speeches from the ECB's President Christine Lagarde and Vice President Luis de Guindos later on Wednesday. 

• EUR/USD climbed on Tuesday, netting a half-percent gain and touching a three-week high.
• Fiber pushed back above the 200-day EMA, but plenty of technical issues remain.
• Looming Fed rate cut to give investors plenty to chew on following US presidential election.

EUR/USD benefited from a broad-market decline in the US Dollar as global markets brace for early polling outcomes from the US presidential election that kicked off on Tuesday. Fiber jumped two-thirds of one percent to claw back above the 1.0900 handle as investors hope for a market-positive outcome as the US election cycle gets set to pick the next US President for the next four years.

Outside of an appearance from European Central Bank (ECB) President Christine Lagarde, EU-based market data remains relatively limited this week. Pan-EU Retail Sales figures are due on Thursday, with this week’s EU leaders’ summit set to wrap up on Friday and a follow-up appearance from ECB President Lagarde slated for Saturday when the market will be closed.

US election odds have both candidates neck-and-neck in a dead-heat race for the Presidency, with former President Donald Trump and current Vice President Kamala Harris polling within 5% of each other, depending on which poll results you reference. Equity investors, tech sector addicts specifically, appear to broadly believe former President Trump to be the preferred stock-friendly candidate, an odd choice considering the Republican candidate has strongly voiced support of a return to the Smoot-Hawley tariff era of US history. Trump has regularly suggested stiff tariffs across the board on all imported goods into the US, an incredibly inflationary economic policy proposal.

Another Federal Reserve (Fed) rate call looms ahead this week. Fed Chair Jerome Powell is widely expected to deliver another quarter-point cut to interest rates on Thursday, bringing the Fed Funds Rate down 25 bps to 4.75%. The Fed Funds Rate peaked at 5.5% in July of 2023, and investors have been clamoring for a return to a low interest rate environment that has become familiar territory since US interest rates clattered to an all-time low near 0% in early 2009.

The University of Michigan’s (UoM) Consumer Sentiment Index is waiting in the wings and slated for release on Friday. Investors expect November’s UoM sentiment indicator to climb to a six-month high of 71.0 from the previous month’s 70.5.

EUR/USD price forecast

The EUR/USD pair is currently staging a rebound above the 1.0900 level after a period of decline, with recent bullish momentum challenging the 50-day EMA, situated at 1.0937. This level aligns closely with the pair’s current trading range, indicating that the area between 1.0900 and 1.0937 could act as a near-term resistance zone. The 200-day EMA, positioned at 1.0902, provided initial support, allowing the pair to bounce back from the lows seen earlier in October, signaling a potential shift in sentiment toward the upside.

The MACD indicator on the daily chart shows signs of recovery as well, with the MACD line inching closer to the signal line and the histogram flipping into positive territory. This transition suggests a potential build-up in bullish momentum, although the crossover has yet to materialize decisively. A clear MACD crossover, if achieved, could support further gains in the short term. For now, traders should be cautious as the pair remains at a crucial juncture where rejection from the 50-day EMA could lead to another downside test.

In the immediate term, sustained buying pressure could propel EUR/USD toward the 1.1000 psychological resistance, with further gains likely if buyers manage to clear the 50-day EMA. On the downside, any loss of the 1.0900 level could see the pair revisiting 1.0850 and, potentially, the October lows near 1.0700. Overall, while the pair’s technicals indicate a cautiously bullish outlook, EUR/USD remains vulnerable to reversal if it fails to break above the moving averages decisively.

EUR/USD daily chart

The Euro (EUR) partially retraced earlier gains amidst US election volatility. Pair was last seen at 1.0898 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong notes.

2-way risks amid the US elections

“Momentum is mild bullish while the rise in RSI moderated. Resistance here at 1.09 (50% fibo), 1.0940 (100 DMA), 1.0970. Support at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.0760 (recent low).”

“Risks are 2-way from here dependent on outcome of US election results (which should start coming in on Wednesday).”

• EUR/USD wobbles near 1.0900 ahead of the US presidential election, which will influence market sentiment.
• Investors expect a neck-to-neck competition between Kamala Harris and Donald Trump.
• The ECB is expected to cut interest rates by 25 bps in the December meeting.

EUR/USD consolidates around 1.0890 in Tuesday’s European session. The major currency pair remains shy of the key resistance of 1.0900 on the United States (US) presidential election day. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades steadily near 103.80 at the time of writing. 

The Greenback exhibited a strong buying trend in October as traders were pricing in former US President Donald Trump’s victory. However, it struggles to extend its upside further as traders expect tough competition between Trump and current Vice President Kamala Harris now. The likelihood of Trump’s victory has witnessed a pullback after the Des Moines Register/Mediacom Poll showed Harris gaining a slight lead of three points in Iowa state, where the Republican party gained a clear majority in 2016 and 2020.

“A Red Wave (favoring Republicans) would kick-start a sizeable USD rally. It would rekindle memories of US Exceptionalism, anchored by tariffs, tax cuts, deregulation, and negative impacts on the outlook for EZ and China," according to analysts at TD Securities.

While the US presidential election will be the key event for the US Dollar this week, investors will also pay close attention to the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Thursday. The Fed is expected to reduce interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool. Investors will focus on Fed Chair Jerome Powell's speech for fresh cues over likely monetary policy action in December.

On the economic data front, investors await the US ISM Services Purchasing Managers Index (PMI) data for October, which will be published at 15:00 GMT. The Services PMI is estimated to come in at 53.8, lower than 54.9 in September, suggesting that the activities in the service sector expanded but at a slower pace.

Daily digest market movers: EUR/USD remains flat-lined on the Euro’s mixed performance

• EUR/USD trades inside Monday’s trading range as investors sideline ahead of the opening of polls for US election voting. The major currency pair is expected to be mainly guided by the US Dollar in an event-packed week. 
• While the Euro (EUR) struggles for direction against the US Dollar, it performs weakly against Asia-Pacific currencies after upbeat Caixin Manufacturing and Services PMI. Still, it outperforms other major currencies as traders pare European Central Bank (ECB) dovish bets.
• Market participants expect the ECB to cut the Deposit Facility Rate again in December by a usual size of 25 bps. Earlier, investors were anticipating a 50-bps interest rate cut by the ECB in its last policy meeting of the year as few officials highlighted growing risks to economic growth and emphasized the need for large economic stimulus to boost domestic spending and investment.
• ECB’s large rate cut bets diminished after better-than-expected Eurozone Q3 Gross Domestic Product (GDP) growth, which receded fears of an economic downturn. Meanwhile, revised German and Eurozone HCOB Manufacturing PMI estimates have improved against flash readings. However, the manufacturing output index remained below the 50.0 threshold, suggesting that the contraction trend remains intact.

Technical Analysis: EUR/USD remains shy of 1.0900

EUR/USD struggles for an establishment above the immediate resistance of 1.0900, which also aligns with the 200-day Exponential Moving Average (EMA). The pair rebounded sharply towards the end of October after gaining a firm footing near an upward-sloping trendline around 1.0750, which is plotted from the April 16 low at around 1.0600

The 14-day Relative Strength Index (RSI) climbs to near 50.00, suggesting some signs of a bullish reversal. However, this will only be confirmed if the RSI (14) climbs above 60.0 decisively.

Looking up, if the shared currency pair breaks above the 200-day EMA around 1.0900, it could rise to near the September 11 low around 1.1000. On the downside, the October 23 low of 1.0760 will be the key support area for the Euro bulls.

The Euro (EUR) is expected to consolidate between 1.0850 and 1.0905. In the longer run, upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR is likely to face resistance at 1.0935

24-HOUR VIEW: “We noted yesterday that ‘the outlook for EUR is mixed.’ We expected it to ‘trade sideways, likely staying within last Friday’s range of 1.0831/1.0905.’ EUR subsequently traded in a narrower and higher range of 1.0870/1.0914, closing at 1.0877 (+0.40%). The price movements did not result in any increase in either downward or upward momentum. The current price movements are likely part of a consolidation phase. Today, we expect EUR to trade between 1.0850 and 1.0905.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (01 Nov, spot at 1.0885), wherein ‘upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935.’ Yesterday, EUR gapped higher upon opening. During London trade, it rose briefly to a fresh 3-week high of 1.0914 before pulling back to close at 1.0877. While we continue to expect EUR to advance, there has been no further increase in momentum, and it remains to be seen if it can break above 1.0935 in a sustained manner. On the downside, a breach of 1.0830 (‘strong support’ level previously at 1.0815) would mean that the current upward pressure has faded.”

• EUR/USD trades in positive territory around 1.0880 in Tuesday’s early European session. 
• The negative outlook of the pair prevails below the 100-day EMA and bearish RSI indicator. 
• The immediate resistance level emerges at  1.0931; the first downside target is seen at 1.0800. 

The EUR/USD pair remains firmer near 1.0880 during the early European session on Tuesday. The uncertainty surrounding the US presidential election outcome weighs on the Greenback and provides some support to the pair. 

 “A Republican clean sweep can send the dollar higher, but probably by less than how much a Harris win could hit USD. The dollar might not rally at all if Trump wins but Democrats secure the (U.S. House of Representatives),” noted ING Bank analysts. 

Technically, the EUR/USD pair keeps the bearish vibe on the daily chart as the major pair holds below the key 100-day Exponential Moving Averages (EMA). Additionally, the downward momentum is supported by the Relative Strength Index (RSI), which stands below the midline near 47.25, suggesting that the path of least resistance is to the downside. 

The 1.0800 psychological level acts as an initial support level for EUR/USD. Further south, the next contention level is seen at the 1.0770-1.0760 region, representing the low of October 24 and the lower limit of the Bollinger Band. A breach of the mentioned level could expose 1.0666, the low of June 26.

On the bright side, the first upside barrier for the major pair emerges near 1.0931, the 100-day EMA. The additional upside filter to watch is 1.0951, the upper boundary of the Bollinger Band. The crucial resistance level is located at the 1.1000 round mark.  

EUR/USD daily chart

• EUR/USD remains firmer around 1.0880 in Tuesday’s early Asian session. 
• The outcome of the US presidential election and the Fed rate decision will be the highlights for this week.  
• A slew of Eurozone economic data dampens the hope of large rate cuts by  the ECB in December.

The EUR/USD pair trades with mild gains near 1.0880 during the early Asian session on Tuesday. The US Dollar (USD) edges lower as traders brace for the outcome of the US presidential election and a likely interest rate cut from the Federal Reserve (Fed), which supports some support for the major pair. 

Democratic candidate Kamala Harris and Republican Donald Trump remain almost tied in opinion polls, and the results will be announced for days after voting ends. "The polls suggesting that Harris may have her nose in front in a couple of swing states is causing a bit of profit-taking in the Trump trade,” noted Kenneth Broux, head of corporate research FX and rates at Societe Generale.

Furthermore, the rising expectation that the Fed will cut the interest rate at its November meeting drags the Greenback lower. The US central bank is widely anticipated to cut rates by the usual 25 basis points (bps) on Thursday, rather than the outsized half-point easing of its last decision. According to CME's FedWatch tool, financial markets are now pricing in nearly a 98% odds of a quarter-point reduction and a near 80% chance of a similar-sized move in December.

Across the pond, the Euro gathers strength as the recent Eurozone economic data has diminished expectations for the European Central Bank (ECB) to lower larger interest rates in December. Money markets are currently pricing in a 34 bps rate cut, down from a 42 bps reduction the previous day, indicating that the odds of a deeper 0.5% reduction are diminishing. During the October meeting, the central bank reiterated its commitment to a "data-dependent and meeting-by-meeting" approach to future policy decisions. However, the Eurozone November inflation report might offer some hints about the ECB interest rate outlook. 
 

The Euro (EUR) continued to drift higher as Trump trade unwound. Pair was last seen at 1.0897 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

EUR faces the risk of a rebound

“Momentum is mild bullish while RSI rose. Resistance here at 1.09 (50% fibo), 1.0940 (100 DMA), 1.0970. Support at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.0760 (recent low).”

“The move higher remains in line with our view that quite a bit of negativity is in the price of EUR following recent dovish rhetoric out of ECB, softer growth/ economic momentum, USD strength and the fear of Trump win and the threat of that 10-20% tariff. But with much negativity in the price, we do caution for the risk of rebound.”

Outlook is mixed; the Euro (EUR) is expected to trade sideways, likely staying within last Friday’s range of 1.0831/1.0905. In the longer run, upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Upward momentum is beginning to build

24-HOUR VIEW: “We indicated last Friday that ‘upward momentum is building, albeit tentatively.’ We also indicated that EUR ‘could rise to 1.0905, but the major resistance at 1.0935 is unlikely to come under threat.’ In NY trade, EUR rose to 1.0905, then pulled back sharply to close at 1.0834. In early Sydney trade today, EUR gapped up. The outlook is mixed, and today, we expect EUR to trade sideways, likely remaining within last Friday’s range of 1.0831/1.0905.”

1-3 WEEKS VIEW: “Last Friday (01 Nov, spot at 1.0885), we noted that ‘upward momentum is beginning to build.’ We held the view that EUR ‘could edge higher, but any advance is expected to face significant resistance at 1.0935.’ We highlighted that ‘To maintain the buildup in momentum, EUR must remain above the ‘strong support’ level, currently at 1.0815.’ EUR subsequently rose to 1.0905, then pulled back sharply to a low of 1.0831. It gapped higher today. While the buildup in momentum has slowed after the pullback, we will continue to hold the same view as long as 1.0815 is not breached.”

• EUR/USD climbs to near 1.0900 as the US Dollar faces intense selling pressure ahead of the  US presidential election and the Fed’s policy announcement.
• The latest polls have shown Harris having a slight advantage over Trump.
• The Fed is expected to cut interest rates again on Thursday, but at a slower pace than the 50 bps trim it delivered in September.

EUR/USD jumps around the key resistance of 1.0900 in Monday’s European session. The major currency pair surges at the US Dollar’s (USD) expense amid increasing uncertainty ahead of the United States (US) presidential election on Tuesday and the Federal Reserve’s (Fed) monetary policy meeting on Thursday.

The US Dollar has started the week on a bearish note, with the US Dollar Index (DXY) declining below 103.70 as market participants expect a neck-to-neck competition between former President Donald Trump and current Vice President Kamala Harris. 

The sharp sell-off in the US Dollar came after the release of the Des Moines Register/Mediacom Iowa Poll, which showed Harris up three points on Trump in the state, Reuters reported. The poll’s result marks a turnaround from September in a state that Trump won clearly both in 2016 and 2020.

Traders see a Trump victory as positive for the US Dollar and Treasury yields as he has vowed to raise tariffs on imports and lower taxes, measures that would likely boost inflationary pressures and force the Fed to return to a restrictive policy stance. On the contrary, a Harris win is perceived to be a continuation of current government policies, which traders interpret as beneficial for risk-sensitive currencies.

Meanwhile, the Fed is set to meet on Thursday to decide about interest rates. The meeting, however,  is likely to be overshadowed by the US election outcome and also by the fact that traders have fully priced in a rate reduction of 25 basis points (bps), which would push key borrowing rates lower to 4.50%-4.75%, according to the CME Fedwatch tool. 

Still, investors will pay close attention to the guidance for monetary policy action for the last meeting of this year to be held in December. Markets also expect that the Fed will cut interest rates by 25 basis points (bps) next month.

On the economic data front, investors will focus on the US ISM Services Purchasing Managers’ Index (PMI) data for October, which will be published on Tuesday. The Services PMI is estimated to come in at 53.5, lower than 54.9 in September, suggesting that the index continues to expand but at a slower pace.

Daily digest market movers: EUR/USD gains on multiple tailwinds

• The strength in the EUR/USD pair is also backed by an upbeat Euro (EUR), which performs strongly since last week after a slew of Eurozone economic data diminished expectations of the European Central Bank (ECB) delivering large rate cuts in December.
• The Eurostat reported that the Eurozone economy expanded at a faster-than-expected pace in the third quarter of the year. Upbeat Eurozone Gross Domestic Product (GDP) data forced trades to pare bets supporting a larger-than-usual interest rate cut of 50 bps in the policy meeting next month.
• Meanwhile, inflationary pressures in the Eurozone accelerated to 2% in October, according to the flash estimate, also weighing on the ECB's big rate cut bets.
• In Monday’s session, investors will focus on the final HCOB Manufacturing PMI data for October from Germany and the overall Eurozone as well as the November Sentix Investors Confidence data. Apart from that, the speech from ECB policymaker and President of the Bundesbank Joachin Nagel will be on investors’ radar for fresh guidance on interest rates.

Technical Analysis: EUR/USD sees more upside above 1.0900

EUR/USD strives to extend its upside above the key resistance of 1.0900, which also aligns with the 200-day Exponential Moving Average (EMA). The pair rebounded sharply after gaining a firm footing near the upward-sloping trendline around 1.0750, which is plotted from the April 16 low at around 1.0600.

The 14-day Relative Strength Index (RSI) climbs to near 50.00, suggesting that the bearish momentum is fading.

Looking up, the shared currency pair could rise to near the September 11 low around 1.1000 after breaking above the 200-day EMA around 1.0900. On the downside, the October 23 low of 1.0760 will be the key support area for the Euro bulls.

• EUR/USD appreciates as the US Dollar receives downward pressure following the release of weaker Nonfarm Payrolls on Friday.
• The US Dollar may receive support from safe-haven flows amid uncertainty surrounding the US presidential election.
• The Euro found support as recent economic data in the Eurozone has prompted traders to reassess the ECB’s policy outlook.

EUR/USD retraces its recent losses from the previous session, trading around 1.0880 during Asian hours on Monday. The pair's upside can be attributed to a softer US Dollar (USD) after the release of weaker-than-expected US October Nonfarm Payrolls (NFP) data. However, uncertainty surrounding the US presidential election could drive safe-haven flows, potentially limiting the upside of the EUR/USD pair.

On Friday, data from the US Bureau of Labor Statistics (BLS) indicated that October’s NFP increased by only 12,000, following a revised September gain of 223,000 (down from 254,000), which fell well short of market expectations of 113,000. Meanwhile, the Unemployment Rate remained steady at 4.1% in October, matching the consensus forecast.

According to the final New York Times/Siena College poll, cited by Reuters, Democratic candidate Kamala Harris and Republican nominee Donald Trump are locked in a close contest across seven battleground states just two days before the US presidential election.

The poll shows Vice President Kamala Harris with slight leads in Nevada, North Carolina, and Wisconsin, while former President Donald Trump holds a narrow advantage in Arizona. The two are in tight races in Michigan, Georgia, and Pennsylvania. The poll, conducted from October 24 to November 2, indicates that all matchups in these states fall within the 3.5% margin of error.

The Euro found support from stronger-than-expected economic growth in the third quarter and higher-than-anticipated inflation in the Eurozone, prompting traders to reassess expectations for a larger-than-usual rate cut by the European Central Bank (ECB) in December. Markets have now fully priced in a 25 basis point cut in the ECB’s deposit rate for December, which would be the fourth reduction this year following cuts in October, September, and June.

Preliminary data showed that the Eurozone Harmonized Index of Consumer Prices rose to 2.0% year-over-year in October, up from 1.7% previously and beating forecasts of 1.9%. Meanwhile, the annual core inflation rate held steady at 2.7%. Additionally, Eurozone Gross Domestic Product (GDP) grew by 0.4% quarter-over-quarter in Q3, doubling the growth seen in Q2 and surpassing expectations of 0.2%.

EUR/USD has drifted a little lower over the course of the session so far, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR rebound momentum stalls

“Market participation has perhaps weakened ahead of the US jobs data, the weekend and the US election Tuesday, with no major data from the Eurozone to drive sentiment. More to the point, perhaps, is the fact that the steady narrowing in EZ/US short-term spreads that helped lift the EUR over the past week has stopped and reversed a basis point or so late in the week.”

“The EUR’s push through resistance at 1.0875 failed to give spot gains the additional boost I thought it might. Gains were capped around 1.0890 and now, spot’s drift lower risks extending in the short run if the market eases below 1.0845 minor support on the session.”

• EUR/USD falls as investors stay cautious ahead of the US official employment and the Manufacturing PMI data for October.
• The US presidential election could potentially inject volatility into the major pair as a Trump win could hurt the Eurozone’s export sector.
• Market expectations for large rate cuts from the ECB in December have diminished amid a pickup in inflation and higher growth.

EUR/USD slumps from a fresh two-week high near 1.0890 in European trading hours on Friday. The major currency pair declines as the US Dollar (USD) bounces back amid caution ahead of the release of the United States (US) Nonfarm Payrolls (NFP) and the ISM Manufacturing Purchasing Managers’ Index (PMI) data for October, which will be published in the New York session.

Economists expect the US economy to have added 113K fresh payrolls, significantly lower than the 254K increase seen in September. The Unemployment Rate is expected to have remained steady at 4.1%. 

Investors will pay close attention to the employment data as it will significantly influence market expectations for the Federal Reserve (Fed) interest rate path. Recent commentary from Fed officials indicates that the central bank is more focused on reviving labor market strength after gaining confidence about inflation returning to the bank’s target of 2%.

Traders are fully pricing in a 25 basis points (bps) rate cut at the Fed’s next meeting on Thursday, and the NFP is unlikely to alter this outlook unless there is a huge surprise. However, the data could have implications for the Fed’s December meeting: higher-than-expected payroll data would point to improving labor market conditions – which could dampen Federal Reserve (Fed) rate cut bets –, while weak employment numbers would boost them. 

Investors will also focus on the Average Hourly Earnings data for October, a key measure of wage growth, and the Manufacturing PMI data from both the ISM and S&P Global. 

As for earnings, the month-on-month wage growth measure is expected to have grown by 0.3%, slower than 0.4% in September, with annual figures rising steadily by 4%. 

The ISM Manufacturing PMI is seen at 47.6 in October, up slightly from 47.2 in September, suggesting that the contracting trend is intact but its pace has slowed. The final estimate of the S&P Global Manufacturing PMI is expected to remain unchanged from the 47.8 flash reading.

Daily digest market movers: EUR/USD falls as US Dollar rebounds

• EUR/USD faces a slight correction from near 1.0890 due to US Dollar’s recovery. However, the Euro’s (EUR) performance against other peers has remained firm on multiple tailwinds. Faster-than-expected Eurozone Gross Domestic Product (GDP) growth in the third quarter of the year and hotter-than-forecasted inflation have forced traders to reassess bets supporting European Central Bank (ECB) larger-than-usual rate cut bets for the December policy meeting.
• Eurostat showed on Wednesday that the Eurozone economy expanded by 0.9% compared to the same quarter of the preceding year, accelerating from the 0.6% growth in the previous quarter, mainly due to a surprise performance of the German economy, according to flash estimates. This has diminished the immediate risks of an economic downturn, although the outlook remains uncertain ahead of the US presidential election, which will take place on Tuesday.
• Eurozone exports are expected to be hit if former President Donald Trump wins against current Vice President Kamala Harris. Trump has vowed for a universal tariff of 10% on all nations – except China, which is expected to face much higher tariffs – to boost in-house manufacturing capabilities.
• Another factor supporting the EUR is the recent inflation uptick in the Eurozone. The preliminary Harmonized Index of Consumer Prices (HICP) accelerated more than expected to 2% in October from 1.7% in September.

Technical Analysis: EUR/USD struggles to climb above 200-day EMA

EUR/USD falls after posting a fresh two-week high around 1.0890 on Thursday. The major currency pair faces selling pressure near the 20-day Exponential Moving Average (EMA), which trades at around 1.0900. EUR/USD had previously rebounded sharply after gaining a firm footing near the upward-sloping trendline around 1.0750, which is plotted from the April 16  low at around 1.0600.

The 14-day Relative Strength Index (RSI) climbs to near 42.00 after staying in the 20.00-40.00 range for almost a month, suggesting that the bearish momentum is waning.

Looking up, the shared currency pair could rise to near the September 11 low around 1.1000 after breaking above the 200-day EMA around 1.0900. On the downside, the October 23 low of 1.0760 will be the key support area.