|

EUR/USD dips to fresh 2-month lows near 1.0660

  • EUR/USD resumes the decline and retests 1.0670/60.
  • The greenback appears well bid and weighs on the risk complex.
  • Germany Unemployment Rate held steady at 5.6% in May.

Sellers remain well in control of the sentiment around the European currency and now force EUR/USD to drop to 2-month lows near 1.0660 on Wednesday.

EUR/USD weaker on USD-buying, risk-off

EUR/USD extends the sell-off to multi-week lows in the proximity of the 1.0660 region amidst the stronger dollar and in response to disheartening prints from the Chinese calendar earlier on Wednesday.

Indeed, poor prints from the Chinese manufacturing and services sectors reinforce the idea of an uneven recovery in that economy and pour cold water over investors’ expectations of a rapid rebound.

Also failing to lend some support to the single currency appear comments from ECB Board member M. Müller, who advocated for at least two more (25 bps) rate hikes. In addition, he deemed "probably too optimistic" the idea of rate cuts early in 2024. His colleague L. de Guindos also argued that markets are absorbing QT in a positive and smooth way.

In the domestic docket, France’s flash Inflation Rate is expected to have contracted 0.1% MoM in May and risen 5.1% YoY. In Germany, the Unemployment Change increased by 9K people in May, and the Unemployment Rate remained unchanged at 5.6%. Later in the session, advanced German inflation figures will also take centre stage, along with the participation of President C. Lagarde in a Q&A session with students.

In the US, MBA Mortgage Applications are due along with the Fed’s Beige Book and speeches by FOMC members Harker, Jefferson, and Bowman.

What to look for around EUR

The sell-off in EUR/USD appears unabated and revisits the 1.0660 region, or 2-month lows, on Wednesday.

In the meantime, the pair’s price action is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting interest rates.

Moving forward, hawkish ECB speak continues to favour further rate hikes, although this view appears to be in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany Unemployment Change, Unemployment Rate, Flash Inflation Rate, ECB Lagarde (Wednesday) – Germany Retail Sales/Final Manufacturing PMI, EMU Final Manufacturing PMI, Flash Inflation Rate, ECB Lagarde, ECB Accounts (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (and September?). Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is losing 0.66% at 1.0663 and faces initial contention at 1.0600 (round level) seconded by 1.0516 (low March 15) and finally 1.0481 (2023 low January 6). On the upside, a break above 1.0813 (100-day SMA) would target 1.0881 (55-day SMA) en route to 1.1000 (round level).

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

More from Pablo Piovano
Share:

Editor's Picks

AUD/USD sits near a one-month top, above 0.7000 amid fresh USD selling

AUD/USD holds above 0.7000 through the Asian session, trading near a one-month high touched earlier this Monday amid renewed US Dollar selling. US bond yields decline further amid a modest pullback in crude oil prices, capping the USD recovery from a three-week low. Moreover, bets for a November RBA rate hike support the Aussie, though upside seems capped ahead of the crucial two-day FOMC meeting, starting Tuesday.

USD/JPY struggles below 157.00 on weak USD; holds above one-month low ahead of Fed, BoJ meetings

USD/JPY attracts fresh sellers during the Asian session on Monday, stalling its recovery from the lowest level since September 18, touched Friday as a further decline in US bond yields weighs on the US Dollar. Meanwhile, the Japanese Yen benefits from a more hawkish BoJ, further weighing on the currency pair. The downside, however, seems limited as traders keenly await Fed and BoJ policy meetings later this week.

Gold sticks to modest recovery gains above $4,000 as Fed hike bets cap upside

Gold stages a modest recovery from the vicinity of a three-month low, trading above the $4,000 psychological mark through Monday’s Asian session amid a softer US Dollar. US President Donald Trump has ruled out immediate military action against Iran, triggering a modest pullback in crude oil prices. Furthermore, Federal Reserve officials have signaled no urgency to raise interest rates immediately.

Cardano's derivatives and on-chain data confirm bears in control

Cardano extends losses, trading below $0.202 after three consecutive weeks of more than 20% declines since early October. Selling pressure continues to build as weakening derivatives metrics, bearish on-chain signals and a deteriorating technical outlook point to further downside risks. Derivatives data shows a bearish bias for Cardano.

CFTC Report: WTI rally runs ahead of positioning
The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.
What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.