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EUR/USD knocked into 1.0525 as Gaza escalation, political uncertainty sour the mood

  • The EUR/USD is extending its decline for Wednesday, backsliding into 1.0525.
  • the EUR failed to complete a drive into the 1.0600 handle as market sentiment turns broadly lower.
  • US Treasury yields are back on the rise, with the 10-year T-note yield at its highest price since 2007.

The EUR/USD kicked off Wednesday trading looking to reclaim the 1.0600 handle in the early sessions, but a resurgence of risk-off market flows has sent the Euro (EUR) back down against the US Dollar (USD), knocking the floor out of yesterday's low and testing the waters near 1.0520.

The pair is currently trading back up into 1.0550 in a relief pullback, but overall market sentiment continues to lean bearish and upside momentum is likely to remain limited.

Global tensions are rising as the Gaza Strip conflict between Israel and Hamas continues to escalate; the latest rocket strike on a hospital in Gaza sees one of the largest civilian death tolls in recent history, with over 500 shelter-seekers dead who were looking to take refuge in the hospital before a rocket struck the building. Both Israel and Hamas have blamed the other side for the building strike.

Hamstrung US Congress over failed Speaker vote making investors uneasy as funding crunch looms

In the US, political uncertainty is on the rise as the US Congress fails to select a new Speaker of the House, with two votes in two days failing to secure a nominee. With the US Congress paralyzed after the Republican majority ousted their own Speaker, the US is only 30 days away from the end of a short-term funding stopgap that was secured in the eleventh hour earlier this month.

With the US barreling towards another partisan funding clash in mid-November, uncertainty is on the rise and uneasy investors are pulling back into safe havens, propping up the USD and sending US Treasury yields into multi-year highs, with the 10-year Treasury hitting 4.928% on Wednesday, its highest yield since 2007.

EU Index of Consumer Prices (CPI) inflation figures on Wednesday came in as-expected, with September's CPI inflation coming in at 0.3%, and the European Central Bank (ECB) President Christine Lagarde noting that underlying inflation remains strong, with wage growth still "historically high".

ECB’s Lagarde: Underlying inflation is still strong, wage growth is historically high

Next up on the economic calendar will be US Initial Jobless Claims on Thursday, with investors forecasting 212K new jobless claimants for the week into October 13th, compared to 209K for the previous week.

US Federal Reserve (Fed) Chairman Jerome Powell will also be giving a speech tomorrow. Fed Chair Powell will be speaking at the Economic Club of New York Luncheon around 16:00 GMT Thursday.

EUR/USD Technical Outlook

The EUR/USD is continuing to face rejection from a firm descending trendline drawn from July's swing high at 1.1275. The pair is struggling to maintain a bullish bounce from the last major swing low into 1.0450, and a bearish continuation will see the pair set to make a new 10-month low.

Near-term resistance is coming from a bearish 50-day Simple Moving Average (SMA), currently descending into the 1.0700 chart region, while the 200-day SMA is beginning to rollover into a bearish pattern from just north of the 1.0800 handle.

EUR/USD Daily Chart

EUR/USD Technical Levels

EUR/USD

Overview
Today last price1.0537
Today Daily Change-0.0040
Today Daily Change %-0.38
Today daily open1.0577
 
Trends
Daily SMA201.0566
Daily SMA501.0713
Daily SMA1001.083
Daily SMA2001.0823
 
Levels
Previous Daily High1.0595
Previous Daily Low1.0533
Previous Weekly High1.064
Previous Weekly Low1.0496
Previous Monthly High1.0882
Previous Monthly Low1.0488
Daily Fibonacci 38.2%1.0571
Daily Fibonacci 61.8%1.0557
Daily Pivot Point S11.0542
Daily Pivot Point S21.0506
Daily Pivot Point S31.048
Daily Pivot Point R11.0604
Daily Pivot Point R21.063
Daily Pivot Point R31.0666

Author

Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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