- EUR/USD oscillates in a narrow range on Monday and seems vulnerable to decline further.
- The Fed’s hawkish outlook continues to underpin the USD and cap the upside for the pair.
- Looming recession risks and the ECB’s dovish rate hike further seem to weigh on the Euro.
The EUR/USD pair struggles to gain any meaningful traction on the first day of a new week and oscillates in a narrow trading band, around mid-1.0600s through the early European session. Spot prices, meanwhile, remain well within the striking distance of the lowest level since March touched last Friday and seem vulnerable to prolonging the downward trajectory witnessed over the past two months or so.
The US Dollar (USD) stands tall near a six-month peak in the wake of the Federal Reserve's (Fed) hawkish outlook, which, in turn, is seen as a key factor acting as a headwind for the EUR/USD pair. The Fed last week reiterated that interest rates will remain higher for longer and warned that still-sticky inflation in the US was likely to attract at least one more interest rate hike by the end of this year. Furthermore, policymakers now see just two rate cuts in 2024 as compared to four projected previously, which remains supportive of elevated US Treasury bond yields.
In fact, the rate-sensitive two-year US government bond yield holds steady near its highest level since 2006 and the benchmark 10-year Treasury yield hovers near a 16-year top. This, along with persistent worries about a property market crisis in China, underpins the safe-haven Greenback. The shared currency, on the other hand, is weighed down by the European Central Bank's (ECB) dovish rate decision last Thursday. This turns out to be another factor that fails to assist the EUR/USD pair to attract buyers or register any meaningful recovery from a multi-month low.
The ECB downgraded its CPI and GDP growth forecasts for 2024 and 2025, suggesting that the 14-month-long policy tightening cycle could have reached its peak already. Furthermore, the Eurozone PMI released on Friday indicated that the struggling manufacturing sector continued to weigh on growth in September and fueled speculations about a possible contraction in GDP during the second half of the year. This, in turn, reaffirms market expectations that further hikes may be off the table for now and supports prospects for a further depreciating move for the EUR/USD pair.
Traders now look to the German Ifo Business Climate for some impetus ahead of ECB President Christine Lagarde's scheduled speech later during the early North American session. Meanwhile, there isn't any relevant market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of the US bond yields. Apart from this, the broader risk sentiment might influence the USD price dynamics and contribute to producing short-term trading opportunities around the EUR/USD pair.
Technical levels to watch
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 drops below 1.0800 ahead of key US jobs data
EUR/USD is dropping below 1.0800 in the European session on Wednesday. The pair is dragged by a renewed uptick in the US Dollar, as markets trade with caution ahead of a busy EU and US economic docket. US ADP is the key event risk.
GBP/USD battles 1.2600, with eyes on US ADP data
GBP/USD is trading close to 1.2600, snapping a two-day losing streak in European trading on Wednesday. The modest US Dollar decline acts as a tailwind for the pair but the Pound Sterling struggles amid a cautious market mood. US jobs data awaited.
Gold finds buyers near $2,020, awaits US ADP jobs data
Gold is finding a floor near $2,020 early Wednesday, snapping a two-day correction from all-time highs of $2,144 set on Monday. XAU/USD price capitalizes on a broad US Dollar retreat, as Greenback buyers take a breather following this week’s upswing and ahead of the top-tier US ADP Employment Change data.
Bitcoin-based meme coin ORDI price action wobbles after 1,100% rally
The Bitcoin-based BRC-20 meme coin, which had people confused as being an actual valuable token, is now slowly creeping up to that status. ORDI price rise over the past couple of days has been astonishing, and with BTC driving the price and crossing $44,000, ORDI is also gaining rapidly. But not for long.
The Dollar is struggling to trend
For the last three trading sessions, the dollar index has been crossing up and down the 200-day moving average every day. All in all, the flirting with this level has been going on for more than three weeks, during which neither bulls nor bears were able to form a stable trend.