EUR/USD wobbles in search for fresh Fed, ECB interest rate path cues

• EUR/USD stays in a tight range near 1.0950 despite the hotter-than-expected US PPI.
• The Fed is expected to cut interest rates by 25 bps in November.
• The Euro holds strength despite firm ECB dovish bets amid a faster-than-expected decline in Eurozone inflationary pressures.

EUR/USD consolidates near 1.0930 in Friday's New York session. The major currency trades sideways as the US Dollar (USD) remains flat despite the release of the United States (US) Producer Price Index (PPI) data, which showed that producer inflation accelerated at a faster-than-expected pace in September year-on-year. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, juggles near 103.00.

The report showed that the annual headline PPI inflation decelerated at a slower-than-expected pace to 1.8% from 1.9% in August, upwardly revised from 1.7%. Economists expected the headline producer inflation to have grown by 1.6%. In the same period, the core PPI – which strips off volatile food and energy prices – rose by 2.8%, faster than estimates of 2.7% and the former release of 2.6%, upwardly revised from 2.4%. The monthly headline PPI remained flat, while the core figure grew expectedly by 0.2%.

Hotter-than-expected US producer inflation after stubborn inflation data has renewed risks of inflation remaining persistent. However, it is unlikely to weigh on market expectations for the Federal Reserve (Fed) to cut interest rates in November by 25 basis points (bps), according to the CME FedWatch tool.

On the contrary, Atlanta Federal Reserve (Fed) Bank President Raphael Bostic has brought the option of leaving interest rates unchanged at 4.75%-5.00% in November on the table.

The comments from Bostic in an interview with the Wall Street Journal on Thursday indicated that he is comfortable with skipping the interest rate cut next month. Bostic said, “This choppiness to me is along the lines of maybe we should take a pause in November and I'm definitely open to that.” His comments came after the release of the US Consumer Price Index (CPI) report, which showed that inflationary pressures rose at a faster-than-expected pace in September.

Apart from September's PPI report, the preliminary Michigan Consumer Sentiment Index for October has also been released, which has surprisingly come in lower at 68.9 than estimates of 70.8 and the prior release of 70.1.

Daily digest market movers: EUR/USD remains sideways while Euro outperforms against other peers

• EUR/USD trades sideways near 1.0950 in North American trading hours. However, the Euro performs strongly against other major peers despite market participants expect the European Central Bank (ECB) to cut interest rates further in both monetary policy meetings remaining this year.
• The ECB has already reduced its Deposit Facility Rate by 50 basis points (bps) to 3.5% this year. The central bank is expected to cut them further by 50 bps again in the remaining year. Traders have priced in two rate cuts of 25 bps, one of which will come next week and the second in December.
• ECB dovish bets have been accelerated by a faster-than-expected decline in Eurozone inflationary pressures and growing risks to economic growth. This week, ECB policymaker and Governor of the Greek Central Bank Yannis Stournaras said that price pressures are declining faster than the ECB forecasted in September. Stournaras also backed two more rate cuts in each of the remaining meetings this year, emphasizing the need to reduce them further in 2025.
• Meanwhile, revised estimates for the German Harmonized Index of Consumer Prices (HICP) for September have shown that price pressures remained below the bank’s target of 2% at 1.8%, as shown in flash estimates.
• On the economic front, the growth prospects of the Eurozone are vulnerable as its largest nation, Germany is forecasted to close the year with a decline in output by 0.2%, the German economic ministry said.

Technical Analysis: EUR/USD holds key 1.0900 support

EUR/USD finds temporary support near the 200-day Exponential Moving Average (EMA) around 1.0900. The near-term outlook of the pair remains uncertain as the 20- and 50-day EMAs are on course to deliver a bear cross near 1.1020.

The shared currency pair weakened after delivering a breakdown of a Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) settles inside the bearish range of 20.00-40.00, suggesting more weakness ahead.

Looking down, the pair is expected to find support near the round-level support of 1.0800 if it decisively breaks below the 200-day EMA around 1.0900. On the upside, the September 11 low of 1.1000 and the 20-day EMA at 1.1090 will be major resistance zones.