EUR/USD Analysis: Post-ECB slide stalls near 100-DMA, Eurozone data eyed for fresh impetus
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UNLOCK OFFER- Fresh COVID-19 restrictions in France and Germany continued weighing on the euro.
- The USD retained its safe-haven status and exerted some heavy pressure on EUR/USD.
- The overnight bearish pressure aggravated further in reaction to the ECB’s easing bias.
The EUR/USD pair witnessed some heavy selling for the fourth consecutive session on Thursday – also marking the fifth day of a negative move in the previous six – and dived to one-month lows. The US dollar retained its safe-haven status and shot to four-week tops amid growing market worries about the potential economic fallout from the continuous surge in new coronavirus cases. On the other hand, the shared currency was being weighed down by the imposition of fresh COVID-19 restriction in Germany and France, the Eurozone's two largest economies. The already weaker sentiment surrounding the euro deteriorated further after the European Central Bank (ECB) signalled further monetary easing by the end of the year.
As was widely expected, the ECB kept interest rates on hold and explicitly mentioned that it is ready to recalibrate its instruments in December. The sense of urgency for more easing has been exacerbated by the alarming pace of growth in new coronavirus cases in Europe, which is expected to dent growth. In the post-meeting press conference, the ECB President, Christine Lagarde said that the risk to the region's recovery was tilted to the downside and that the Governing Council has agreed to take action at the next policy meeting. Lagarde further added that inflation is expected to remain negative until early next year and that the near-term outlook has deteriorated. The ECB's dovish outlook and commitment to take action intensified the bearish pressure surrounding the euro.
Meanwhile, the USD bulls largely shrugged off the uncertainty over the actual outcome of the US presidential election next week, instead took cues from stronger-than-expected US GDP report. According to the advance estimates released by the US Bureau of Economic Analysis, the world's largest economy expanded by 33.1% annualized pace during the third quarter of 2020 as against a growth of 31% anticipated. Separately, the US Initial Weekly Jobless Claims came in at 751K during the week ended October 24, down from 791K reported in the previous week. As investors looked past Thursday's key event and the US macro data, a modest recovery in the US equity markets kept a lid on any further gains for the greenback and ease the bearish pressure surrounding the major.
The pair finally settled around 25 pips off daily lows and built on the modest recovery move through the Asian session on Friday. The uptick, however, lacked any strong bullish conviction and the pair remained below the 1.1700 level. Market participants now look forward to the preliminary estimates of the third-quarter German and Eurozone GDP. This, along with the flash version of the Eurozone consumer inflation figures, will influence the shared currency. The US economic docket features the release of Core PCE Price Index, Chicago PMI and revised Michigan Consumer Sentiment. The second-tier US macro data might further assist traders to grab some short-term opportunities on the last day of the week.
Short-term technical outlook
From a technical perspective, the pair this week broke through a one-month-old ascending trend-linesupport. A subsequent fall below the 1.1700 mark managed to find some support near 100-day SMA. However, the near-term bias still seems tilted in favour of bearish traders. Hence, some follow-through weakness back towards testing September monthly swing lows, around the 1.1615-10 region, looks a distinct possibility. Some follow-through selling below the 1.1600 mark should pave the way for an extension of the downward trajectory further towards challenging the key 1.1500 psychological mark in the near-term.
On the flip side, any meaningful recovery back above the 1.1700 mark might now be seen as a selling opportunity near the mentioned trend-line support breakpoint, around the 1.1730 region. This, in turn, should cap the upside for the major near the 50-day SMA, which is currently pegged near the 1.1785 region.
- Fresh COVID-19 restrictions in France and Germany continued weighing on the euro.
- The USD retained its safe-haven status and exerted some heavy pressure on EUR/USD.
- The overnight bearish pressure aggravated further in reaction to the ECB’s easing bias.
The EUR/USD pair witnessed some heavy selling for the fourth consecutive session on Thursday – also marking the fifth day of a negative move in the previous six – and dived to one-month lows. The US dollar retained its safe-haven status and shot to four-week tops amid growing market worries about the potential economic fallout from the continuous surge in new coronavirus cases. On the other hand, the shared currency was being weighed down by the imposition of fresh COVID-19 restriction in Germany and France, the Eurozone's two largest economies. The already weaker sentiment surrounding the euro deteriorated further after the European Central Bank (ECB) signalled further monetary easing by the end of the year.
As was widely expected, the ECB kept interest rates on hold and explicitly mentioned that it is ready to recalibrate its instruments in December. The sense of urgency for more easing has been exacerbated by the alarming pace of growth in new coronavirus cases in Europe, which is expected to dent growth. In the post-meeting press conference, the ECB President, Christine Lagarde said that the risk to the region's recovery was tilted to the downside and that the Governing Council has agreed to take action at the next policy meeting. Lagarde further added that inflation is expected to remain negative until early next year and that the near-term outlook has deteriorated. The ECB's dovish outlook and commitment to take action intensified the bearish pressure surrounding the euro.
Meanwhile, the USD bulls largely shrugged off the uncertainty over the actual outcome of the US presidential election next week, instead took cues from stronger-than-expected US GDP report. According to the advance estimates released by the US Bureau of Economic Analysis, the world's largest economy expanded by 33.1% annualized pace during the third quarter of 2020 as against a growth of 31% anticipated. Separately, the US Initial Weekly Jobless Claims came in at 751K during the week ended October 24, down from 791K reported in the previous week. As investors looked past Thursday's key event and the US macro data, a modest recovery in the US equity markets kept a lid on any further gains for the greenback and ease the bearish pressure surrounding the major.
The pair finally settled around 25 pips off daily lows and built on the modest recovery move through the Asian session on Friday. The uptick, however, lacked any strong bullish conviction and the pair remained below the 1.1700 level. Market participants now look forward to the preliminary estimates of the third-quarter German and Eurozone GDP. This, along with the flash version of the Eurozone consumer inflation figures, will influence the shared currency. The US economic docket features the release of Core PCE Price Index, Chicago PMI and revised Michigan Consumer Sentiment. The second-tier US macro data might further assist traders to grab some short-term opportunities on the last day of the week.
Short-term technical outlook
From a technical perspective, the pair this week broke through a one-month-old ascending trend-linesupport. A subsequent fall below the 1.1700 mark managed to find some support near 100-day SMA. However, the near-term bias still seems tilted in favour of bearish traders. Hence, some follow-through weakness back towards testing September monthly swing lows, around the 1.1615-10 region, looks a distinct possibility. Some follow-through selling below the 1.1600 mark should pave the way for an extension of the downward trajectory further towards challenging the key 1.1500 psychological mark in the near-term.
On the flip side, any meaningful recovery back above the 1.1700 mark might now be seen as a selling opportunity near the mentioned trend-line support breakpoint, around the 1.1730 region. This, in turn, should cap the upside for the major near the 50-day SMA, which is currently pegged near the 1.1785 region.
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