The EUR/USD pair held steady on Tuesday, unable to regain the 1.1000 level but pausing the recent Fibonacci retracement from the 1.1200 area. The euro, which had seen losses after hitting a one-year high in late September, is again falling toward the 1.0950 zone, as the dollar strengthened across the board.
European data has been largely tepid this week, and with the European Central Bank expected to raise rates next week, the economic calendar will be filled with important data releases.
On Wednesday, the latest minutes of the Federal Reserve’s September meeting will be released, which will provide plenty for dollar traders to analyze. Markets were expecting a 25 basis point rate cut in November after the Fed signaled a potential pause in tightening during its September meeting. However, continued core inflation above the Fed’s target along with U.S. jobs numbers, which markedly beat estimates the previous week, have halted hopes for a rate cut.
According to the CME’s FedWatch tool, rate markets see about a 90% chance that the Fed will make a 25 basis point rate cut on November 7. Fed officials have indicated that a significant weakening in the U.S. labor market would be necessary for additional rate cuts.
Thursday’s U.S. inflation report will be the focal point of the week for the Forex market, as it will determine how market sentiment evolves in line with estimates of a rate cut by the Fed. A lower-than-expected reading would boost hopes that the Fed will cut interest rates at least twice more in the remainder of the year, which could weaken the dollar against the euro.
Markets are estimating a figure of about 2.3% year-on-year and 0.1% month-on-month. Any result above this is expected to be strong. Any data above this figure could push back estimates of a rate cut and could cause the euro to struggle to end the week. Other risks contributing to the euro’s decline against the dollar include ongoing concerns over tensions in the Middle East. Israel has also promised a forceful response to last week’s missile attack by Iran. The size and nature of the attack could be considerable, driving demand for safe-haven currencies such as the USD, JPY, and CHF.
EUR/USD Daily Technical Analysis for October 9th:
The EUR/USD appears to be on the verge of entering a sideways phase as the daily candlesticks are establishing a consolidation pattern. The pair is trading between the 50-day and 200-day Exponential Moving Averages (EMA), with buyers attempting a recovery after EUR/USD pulled back from above the 1.1200 area.
If sellers have run out of momentum, euro bulls may challenge the 200-day EMA near 1.0900, although a prolonged decline could push prices back to the 2024 lows near 1.0600.
