- EUR/USD retests YTD peak after the initial negative reaction to dismal Eurozone PMIs this week.
- Dovish Fed expectations and a positive risk tone undermine the USD, lending support to the pair.
- Traders now look to speeches by Fed officials for some impetus ahead of the US PCE on Friday.
The EUR/USD pair attracts some follow-through buying for the second successive day on Wednesday and climbs back closer to a 13-month high, around the 1.1200 mark touched in August. The US Dollar (USD) languishes near the YTD low touched last week amid rising bets for a more aggressive policy easing by the Federal Reserve (Fed) and turns out to be a key factor pushing the currency pair higher. In fact, the markets are now pricing in over a 75% chance that the US central bank will lower borrowing costs by another 50 basis points (bps) in November.
Furthermore, Tuesday's disappointing US macro data and the prevalent risk-on environment seem to undermine the safe-haven Greenback. In fact, the Conference Board's (CB) Consumer Confidence Index deteriorated sharply in September and dropped to 98.7 from August's 105.6, while the Present Situation Index fell to 124.3 from the 134.6 previous. Adding to this, a survey from the Richmond Fed indicated that manufacturing activity remained sluggish and the composite manufacturing index declined to -21 in September from -19 in the previous month.
Meanwhile, a slew of stimulus measures announced by China raised hopes for a recovery in the world's largest economy and boosted investors' appetite for riskier assets. This further contributes to driving flows away from the buck and offsets this week's dismal Eurozone data. The flash Eurozone PMIs released on Monday showed that business activity in the region contracted sharply in September. Moreover, the German IFO Business Climate Index dropped from 86.6 to 85.4 in September, while the Current Economic Assessment Index fell to 84.4. from 86.4 in August.
Traders, however, seem reluctant to place aggressive bullish bets around the EUR/USD pair as the focus remains glued to the upcoming speeches by influential FOMC members, including Fed Chair Jerome Powell on Thursday. Investors this week will also confront the release of the US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge – on Friday. This, in turn, will play a key role in driving market expectations about the Fed's rate-cut path, which should determine the next leg of a directional for the Greenback and the currency pair.
Technical Outlook
From a technical perspective, a sustained strength beyond the 1.1200 mark will be seen as a fresh trigger for bullish traders and pave the way for additional gains. Given that oscillators on the daily chart are holding in positive territory and still away from being in the overbought zone, the EUR/USD pair might then accelerate the positive move towards the July 2023 swing high, around the 1.1275 region. This is followed by the 1.1300 mark, above which the momentum could extend further towards the 1.1335 region en route to the 1.1375 area and the 1.1400 round figure.
On the flip side, the 1.1160 region now seems to protect the immediate downside ahead of the 1.1135 region and the 1.1100 mark. This is closely followed by the weekly low, around the 1.1085-1.1080 zone, below which the EUR/USD pair could drop to the 50-day Simple Moving Average (SMA) support, currently near the 1.1020 zone. Some follow-through selling, leading to a subsequent break below the 1.1000 psychological mark, will suggest that spot prices have topped out and expose the next relevant support near the 1.0950-1.0940 region.
EUR/USD daily chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.