EUR/USD Outlook: Traders seem non-committed around 1.1600, ECB/US GDP awaited
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UNLOCK OFFER- EUR/USD gained some intraday positive traction on Wednesday amid renewed USD selling bias.
- A slump in US bond yields undermined the USD, though a softer risk tone limited deeper losses.
- Investors also seemed reluctant to place aggressive bets ahead of ECB and US GDP on Thursday.
The EUR/USD pair staged a modest intraday bounce from over one-week lows touched earlier on Wednesday, albeit lacked any follow-through. The intraday uptick was sponsored by the emergence of fresh selling around the US dollar, led by a slump in long-dated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond posted the biggest one-day decline in more than three months and dropped to the lowest level in almost two weeks, below the 1.55% threshold. The shared currency was further underpinned by a better-than-expected German Gfk Consumer Climate Index, which unexpectedly rose to 0.9 for November from 0.4 previous.
From the US, the headline Durable Goods Orders declined 0.4% MoM in September as against consensus estimates pointing to a fall of 1.1%. Adding to this, orders excluding transportation items matched expectations and rose 0.4% during the reported month, though did little to provide any respite to the USD. However, a softer risk tone - as depicted by a modest pullback in the equity markets - helped limit deeper losses for the safe-haven greenback. Investors also seemed reluctant to place aggressive bets around the euro heading into the highly-anticipated European Central Bank (ECB) meeting on Thursday. The combination of factors capped the upside for the major.
The ECB stands out as one of the more dovish major central banks and has stuck to the script that higher inflation is transitory. ECB President Christine Lagarde reiterated earlier this month that the central bank would not overreact to rising energy prices. Adding to this, ECB Chief economist Philip Lane stressed the need to be patient and does not consider Eurozone inflation to be in a red zone, which requires immediate action. This, in turn, suggests that the central bank would leave monetary policy settings unchanged and wait for new economic projections at the December meeting before making any announcement. That said, Lagarde's comments at the post-meeting press conference might infuse some volatility around the euro crosses.
Apart from this, the Advance US Q3 GDP report will attract market attention and produce some meaningful trading opportunities around the major. Beyond this, the September US Core PCE Price Index will set the tone heading into next week's FOMC meeting, which could act as a potential trigger for the next leg of a directional move for the major.
Technical outlook
From a technical perspective, the range-bound price action witnessed over the past three trading sessions constitutes the formation of a rectangle and points to indecision among traders. Looking at the broader picture, the recent failure near the 1.1665-70 supply zone suggested that the recovery from YTD lows has run out of steam. That said, the pair has been showing some resilience below the 1.1600 mark, which further warrants some caution before placing aggressive directional bets.
Meanwhile, the 1.1585 region now seems to have emerged as immediate strong support. A convincing break below might then turn the pair vulnerable to slide back towards challenging YTD lows, around the 1.1525 area. Some follow-through selling below the key 1.1500 psychological mark will set the stage for the resumption of a well-established downtrend extending from September monthly swing highs.
On the flip side, any meaningful positive move beyond the 1.1625 region, or the top boundary of the three-day-old trading range, might continue to confront stiff resistance near the 1.1665-70 region. This is closely followed by the 50-day SMA barrier, around the 1.1700 mark, which if cleared decisively will be seen as a fresh trigger for bullish traders. The pair might then accelerate the momentum towards the 1.1765 region and aim to reclaim the 1.1800 round-figure mark.
- EUR/USD gained some intraday positive traction on Wednesday amid renewed USD selling bias.
- A slump in US bond yields undermined the USD, though a softer risk tone limited deeper losses.
- Investors also seemed reluctant to place aggressive bets ahead of ECB and US GDP on Thursday.
The EUR/USD pair staged a modest intraday bounce from over one-week lows touched earlier on Wednesday, albeit lacked any follow-through. The intraday uptick was sponsored by the emergence of fresh selling around the US dollar, led by a slump in long-dated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond posted the biggest one-day decline in more than three months and dropped to the lowest level in almost two weeks, below the 1.55% threshold. The shared currency was further underpinned by a better-than-expected German Gfk Consumer Climate Index, which unexpectedly rose to 0.9 for November from 0.4 previous.
From the US, the headline Durable Goods Orders declined 0.4% MoM in September as against consensus estimates pointing to a fall of 1.1%. Adding to this, orders excluding transportation items matched expectations and rose 0.4% during the reported month, though did little to provide any respite to the USD. However, a softer risk tone - as depicted by a modest pullback in the equity markets - helped limit deeper losses for the safe-haven greenback. Investors also seemed reluctant to place aggressive bets around the euro heading into the highly-anticipated European Central Bank (ECB) meeting on Thursday. The combination of factors capped the upside for the major.
The ECB stands out as one of the more dovish major central banks and has stuck to the script that higher inflation is transitory. ECB President Christine Lagarde reiterated earlier this month that the central bank would not overreact to rising energy prices. Adding to this, ECB Chief economist Philip Lane stressed the need to be patient and does not consider Eurozone inflation to be in a red zone, which requires immediate action. This, in turn, suggests that the central bank would leave monetary policy settings unchanged and wait for new economic projections at the December meeting before making any announcement. That said, Lagarde's comments at the post-meeting press conference might infuse some volatility around the euro crosses.
Apart from this, the Advance US Q3 GDP report will attract market attention and produce some meaningful trading opportunities around the major. Beyond this, the September US Core PCE Price Index will set the tone heading into next week's FOMC meeting, which could act as a potential trigger for the next leg of a directional move for the major.
Technical outlook
From a technical perspective, the range-bound price action witnessed over the past three trading sessions constitutes the formation of a rectangle and points to indecision among traders. Looking at the broader picture, the recent failure near the 1.1665-70 supply zone suggested that the recovery from YTD lows has run out of steam. That said, the pair has been showing some resilience below the 1.1600 mark, which further warrants some caution before placing aggressive directional bets.
Meanwhile, the 1.1585 region now seems to have emerged as immediate strong support. A convincing break below might then turn the pair vulnerable to slide back towards challenging YTD lows, around the 1.1525 area. Some follow-through selling below the key 1.1500 psychological mark will set the stage for the resumption of a well-established downtrend extending from September monthly swing highs.
On the flip side, any meaningful positive move beyond the 1.1625 region, or the top boundary of the three-day-old trading range, might continue to confront stiff resistance near the 1.1665-70 region. This is closely followed by the 50-day SMA barrier, around the 1.1700 mark, which if cleared decisively will be seen as a fresh trigger for bullish traders. The pair might then accelerate the momentum towards the 1.1765 region and aim to reclaim the 1.1800 round-figure mark.
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