EUR/USD month-end flows and critical events ahead send traders to the sidelines

EUR/USD had been on the verge of a test to the 200-hour moving average located around 1.1120 but has run into offers ahead of the target. EUR/USD is currently trading at 1.1109 having travelled some 45 pips from a low of 1.1073 to a high of 1.1118. Indeed, markets are somewhat lacklustre on Tuesday, soaking up a risk-on start to the week ahead of key risk events coming up.

The major themes at this moment in time stay with geopolitical news, ranging from Brexit developments to trade deal progress. For the single unit, mind you, there is an underbelly of risk with respect to the performance of the domestic economy and what the European Central Bank has up its sleeve. 

Scheduled risks events 

The scheduled risks events for the single currency events are as follows: 

• UK vote on holding a General Election.Eurozone CPI and 3Q GDP (31st).
• Final Eurozone PMI (4th).
• German factory orders and Eurozone (6th).
• ECB Bulletin and EC forecasts (7th).

Then, when we look to the wider calendar, there is plenty out there to rock the apple cart with respect to the US Dollar. We have the Federal Open Market Committee, as well as the US/Chinese ISM and Nonfarm Payrolls all this week. That is quite a lot for month-end, and indeed, with a schedule such as this, swing traders may be inclined to wait it out until the start of next month, although news and day traders will be glued to their seats and high volatility should be expected. 

FOMC in focus

The Federal Reserve is expected to cut rates by 25 basis points again next week, delivering the third consecutive rate cut since July. "The FOMC is likely to communicate patience in deciding future policy moves after next week's cut as they assess the impact of the three cuts they have already delivered. We look for the Fed to temporarily pause before resuming rate cuts in Q1 2020," analysts at TD Securities explained.

On a more fundamental switch up, the European Central Bank, (ECB), will bear witness to more than one major transition this week.

"The ECB is about to institute a fundamental change to its financial plumbing. A smooth implementation of a two-tiered deposit rate could see the ECB more open to further policy cuts," analysts at TD Securities explained, adding, that this, "we think, should reinforce the EUR's status as the funding vehicle of choice in FX markets for the foreseeable future" - In turn, that likely means support for the euro in risk-off markets, (euro buy-backs), despite a dovish backdrop. 

EUR/USD levels