- The US Dollar loses momentum during the American session as risk sentiment improves.
- The Euro lags on Monday, with German yields tumbling.
- The EUR/USD has potential for further gains as long as it remains above 1.0530.
The EUR/USD rose during the American session but held below Friday's close. The weakness of the US Dollar was not sufficient to push the pair above 1.0600, and the Euro underperformed, being the weakest among G10 currencies on Monday.
New geopolitical concerns weighed particularly on the Euro, which declined against other major currencies. The 10-year German bond yield dropped more than 4.50% to 2.76%. EUR/CHF slid towards 0.9550, and EUR/GBP fell below 0.8640.
Data showed that German Industrial Production declined by 0.2% in August, worse than the expected 0.1% decrease. The Eurozone Sentix Investor Confidence also dropped in October to -21.9, higher than the market consensus of -25. On Tuesday, there are no significant reports scheduled for release in either the Eurozone or the US. The key number of the week will be the US Consumer Price Index on Thursday.
The US dollar strengthened across the board during the American session, benefiting from an improvement in risk sentiment following the initial market opening after Hamas' attack in Israel. The US Dollar Index (DXY) peaked at 106.60 but then pulled back to 106.00, ending with modest losses due to a decline in US bond yields.
EUR/USD short-term technical outlook
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The EUR/USD remains below the 20-day Simple Moving Average (SMA) and within a downtrend channel. However, in the short term, the Euro shows signs of stabilization that could lead to a test of key resistance levels.
On the 4-hour chart, the price is above the 20-period SMA and consolidating above the 1.0560 level. The next resistance stands at 1.0580, and a breakthrough would expose last week's highs at 1.0600. The short-term bullish bias will remain intact as long as it stays above 1.0530. A break below 1.0520 would target the 1.0500 area, indicating further weakness ahead.
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