|

EUR/USD retreats towards 1.0700 despite initial US debt ceiling deal, US NFP, Eurozone inflation eyed

  • EUR/USD fades the previous day’s bounce off 10-week low.
  • US policymakers offer initial debt ceiling extension agreement but the road through Congress is bumpy.
  • US data favor hawkish Fed bets, ECB policymakers appear undecided.
  • US House, Senate voting on debt ceiling, NFP and Eurozone inflation are the key to watch during holiday shortened week.

EUR/USD stays defensive around 1.0720-30 despite the US policymakers’ initial victory in avoiding the ‘catastrophic’ default. In doing so, the Euro pair grinds higher following a corrective bounce off the lowest levels since March 20, marked the previous day, but fails to gather upside momentum amid mixed feelings and holidays in the US and most of the Eurozone on Monday.

US President Joe Biden and top congressional Republican Kevin McCarthy reached a tentative deal to raise the federal government's $31.4 trillion debt ceiling through January 2025. The deal, however, lacks support from some of the extreme leftists and rightists due to the compromise each party had to do to reach the agreement. It should be noted that the debt ceiling deal needs to pass through the House on Wednesday and the Senate by June 05 to avoid the looming ‘catastrophic’ default. Hence, optimism surrounding the first step of overcoming the default fades and exerts downside pressure on the EUR/USD pair.

Apart from the US debt ceiling fears, upbeat US data and comments from the International Monetary Fund Managing (IMF) Director Kristalina Georgieva also prod the EUR/USD bulls, not to forget mixed statements from the European Central Bank (ECB) Officials.

In the last week, US PMIs, the second estimate of the first quarter (Q1) 2023 Gross Domestic Product (GDP), Durable Goods Orders and the Core Personal Consumption Expenditure (PCE) Price Index for the said month, known as the Fed’s preferred inflation gauge, marked upbeat details in their latest readings. On Friday, US Durable Goods Orders for April came in better-than-forecast to 1.1% from 3.3% prior, versus -1.0% expected. Further, Nondefense Capital Goods Orders ex Aircraft, also known as the Core Durable Goods Orders, marked upbeat growth of 1.4% compared to -0.2% anticipated and -0.6% previous readings. Additionally, the Core PCE Price Index for the said month rose past market forecasts and previous readings of 0.3% MoM and 4.6% YoY to 0.4% and 4.7% in that order.

Considering the data, IMF’s Georgieva stated that the US interest rates will need to be higher for longer. Alternatively, Federal Reserve Bank of Cleveland President Loretta Mester said that the Personal Consumption Expenditures (PCE) Price Index released on Friday underscored the slow progress on inflation. During the weekend, Federal Reserve Bank of Chicago President Austan Goolsbee welcomed the US debt ceiling news while also saying, amid the CBS Show “Face the Nation”, “I try to make it a point not to prejudge and make decisions when you are still weeks out from the meeting."

On the other hand, European Central Bank (ECB) policymaker, Boris Vujčić, said on Friday, “Inflation momentum is still persistent.” The ECB member also added that it is questionable if we will be able to get to 2% in the next two years. On the other hand, ECB Chief Economist, Philip Lane said that (there is) no sense of certainty in terminal rate.

Furthermore, the last week’s downward revision to the German growth numbers renewed recession fears in the bloc and prod the ECB hawks, which in turn allowed the EUR/USD bears to remain hopeful ahead of the key week comprising US jobs report and Eurozone inflation.

Also read: EUR/USD Weekly Forecast: A debt ceiling deal can save bulls

Technical analysis

Friday’s Doji candlestick above the 200-day Exponential Moving Average (EMA), around 1.0685 by the press time, tests EUR/USD bears. However, the likely corrective bounce needs validation from the 61.8% Fibonacci retracement of its March-April upside, near 1.0740 at the latest.

Additional important levels

Overview
Today last price1.0724
Today Daily Change-0.0001
Today Daily Change %-0.01%
Today daily open1.0725
 
Trends
Daily SMA201.0886
Daily SMA501.0904
Daily SMA1001.0816
Daily SMA2001.0483
 
Levels
Previous Daily High1.0759
Previous Daily Low1.0702
Previous Weekly High1.0831
Previous Weekly Low1.0702
Previous Monthly High1.1095
Previous Monthly Low1.0788
Daily Fibonacci 38.2%1.0724
Daily Fibonacci 61.8%1.0737
Daily Pivot Point S11.0698
Daily Pivot Point S21.0671
Daily Pivot Point S31.0641
Daily Pivot Point R11.0755
Daily Pivot Point R21.0785
Daily Pivot Point R31.0812

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Editor's Picks

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying
The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.
Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff
Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.