Euro deflates to daily lows around 1.0550, Dollar remains bid

  • The Euro trades on the defensive against the US Dollar.
  • Stocks in Europe close the session with marked losses.
  • EUR/USD loses some momentum and slips back to 1.0550.
  • The USD Index (DXY) looks bid in the low 106.00s.
  • Eurozone final inflation figures matched the preliminary readings.
  • Housing Starts expanded 7.0% MoM in September.

The Euro (EUR) encounters selling pressure in its exchange with the US Dollar (USD), resulting in EUR/USD declining to the 1.0550 area on Wednesday.

Meanwhile, the Greenback maintains its position in the low 106.00s, as measured by the USD Index (DXY), amid the overall indecisive price movement in global markets. This occurs amidst a prevailing cautious sentiment due to escalating geopolitical risks.

Continuing to centre attention on monetary policy, investors anticipate that the Federal Reserve (Fed) will uphold its position of not touching interest rates throughout the remainder of the year. Meanwhile, participants in the financial markets contemplate the possibility of the European Central Bank (ECB) halting policy modifications, despite inflation levels surpassing the bank's target and mounting concerns about the potential for an economic downturn or stagflation in the region.

On the domestic calendar, the final Inflation Rate for September in the broader Eurozone saw the CPI rise 4.3% YoY and 4.5% YoY when it came to the Core CPI (consumer prices excluding food and energy costs).

Data-wise, in the US, the usual weekly Mortgage Applications tracked by MBA contracted 6.9% in the week to Ocotber 13, while Housing Starts increased 7% MoM in September (1.358M units) and Building Permits contracted 4.4% MoM (1.473M units). In addition, the Fed’s Beige Book and TIC Flows are also due.

Additionally, markets’ attention will also be on speeches by FOMC Governor Christopher Waller (permanent voter, centrist), NY Fed President John Williams (permanent voter, centrist), FOMC Governor Michelle Bowman (permanent voter, hawk), and Philly Fed President Patrick Harker (voter, hawk).

Daily digest market movers: Euro struggles to regain upside traction

  • The EUR trades with modest losses against the USD.
  • US and German yields now leave behind initial losses.
  • Markets remain focused on the Fed’s tighter-for-longer stance.
  • Investors see the ECB could pause its tightening cycle until Q3 2024.
  • The crisis in the Middle East could get worse before it gets better.
  • Chinese data surprised to the upside.
  • UK CPI rose 6.7% YoY in September, a tad above estimates.

Technical Analysis: Euro retargets the 1.0500 support and below

EUR/USD trades in an inconclusive fashion around 1.0570 against the backdrop of a lack of direction in the Greenback.

If the rising trend continues, EUR/USD may revisit the October 12 high of 1.0639, as well as the September 20 top of 1.0736 and the significant 200-day Simple Moving Average (SMA) of 1.0820. A break above this level might signal an effort to break above the August 30 peak of 1.0945 and target the psychological level of 1.1000. Any more gains over the August 10 high of 1.1064 might take the pair towards the July 27 top of 1.1149 and possibly the 2023 peak of 1.1275 seen on July 18.

In the case that selling pressure persists, the 2023 low at 1.0448 from October 3 might be revisited, as well as the major support of 1.0400. If this level is broken, it may pave the way for a retest of the weekly lows of 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022).

As long as the EUR/USD continues below the 200-day SMA, the possibility of continuous bearish pressure exists.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Share: Feed news

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

Recommended content

Editors’ Picks

EUR/USD clings to daily gains above 1.0650

EUR/USD clings to daily gains above 1.0650

EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.


GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.


Gold holds steady at around $2,380 following earlier spike

Gold holds steady at around $2,380 following earlier spike

Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.

Gold News

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in

Bitcoin price shows no signs of directional bias while it holds above  $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research. 

Read more

Week ahead – US GDP and BoJ decision on top of next week’s agenda

Week ahead – US GDP and BoJ decision on top of next week’s agenda

US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.

Read more