- The Euro keeps the bid bias unchanged against the US Dollar.
- Stocks in Europe close the session with a decent advance across the board.
- EUR/USD faces immediate target at the 1.0600 hurdle.
- The USD Index (DXY) meets initial support around 106.30.
- German Wholesale Prices rose 0.2% MoM in September.
- US NY Empire State Manufacturing Index worsens less than expected.
The Euro (EUR) begins the new trading week with a favorable start against the US Dollar (USD), spurring EUR/USD to continue its recovery from the 1.0500 area and reclaim the 1.0550 region on Monday.
The Greenback, as measured by the USD Index (DXY), retreats markedly from last week's peaks near 106.80, reflecting an improved market sentiment for risk assets. Meanwhile, the Federal Reserve's (Fed) ongoing commitment to a more conservative monetary policy stance remains unchanged.
Continuing to focus on monetary policy, investors are anticipating that the Fed will maintain its stance of not making any adjustments to interest rates throughout the remainder of the year. At the same time, those in the financial markets are pondering the possibility of the European Central Bank (ECB) putting a halt to policy modifications, even though inflation levels exceed the bank's target and concerns are growing regarding the potential for a future economic downturn or stagflation in the region.
On another front, the speculative community kept trimming their net long positions during the week ended on October 10, this time reaching levels last seen in late October 2022. Market participants continued to factor in the likelihood that the ECB’s hiking cycle might have reached a peak against the persistent view that the Fed could maintain its restrictive stance for a longer period than initially anticipated.
On the domestic calendar, Wholesale Prices in Germany rose 0.2% MoM in September and contracted 4.1% over the last twelve months, while the trade surplus in the broader euro bloc widened to €6.7B in August.
In the US, the regional manufacturing gauge tracked by the NY Empire State Index dropped to -4.6 for the current mont, less than initially projected. Later in the session, the September’s Monthly Budget Statement is due along with the speech by Philly Fed Patrick Harker (voter, hawk).
Daily digest market movers: Euro's daily rebound falters ahead of 1.0550
- The EUR gathers extra steam against the USD.
- US and German yields start the week with humble gains.
- Markets anticipate that the Fed will keep rates unchanged.
- Investors expect the ECB will extend the pause in its rate rise campaign.
- Geopolitical tensions in the Middle East remain high.
- The PBoC keeps its One-Year LPR unchanged at 2.50%.
- BoE's Huw Pill suggests there is further job to do when it comes to tackle inflation.
- Potential FX intervention remains on the cards around USD/JPY.
Technical Analysis: Euro risks further losses once 1.0500 is cleared
EUR/USD leaves behind part of the recent two-day lows and manages to gather fresh steam beyond 1.0500 on Monday.
If the upward momentum continues, there is a possibility that EUR/USD could revisit the September 20 high of 1.0736 and potentially reach the significant 200-day Simple Moving Average (SMA) at 1.0822. Breaking above this level may lead to testing the August 30 peak at 1.0945, approaching the psychological threshold of 1.1000. Further breakthroughs beyond the August 10 high of 1.1064 could potentially push the pair towards the July 27 top at 1.1149 and even reach the 2023 peak of 1.1275 seen on July 18.
On the downside, if selling pressure resumes, there is a possibility of retesting the 2023 low at 1.0448 from October 3 and potentially challenging the significant psychological level of 1.0400. If this level is breached, it could pave the way for a retest of the weekly lows at 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022).
As long as the EUR/USD remains below the 200-day SMA, there is a potential for sustained downward pressure.
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.
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
Editors’ Picks
![EUR/USD stays below 1.1100, looks to post weekly losses](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/european-euro-coin-on-top-of-american-dollar-bill-11292130_XtraSmall.jpg)
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
![GBP/USD struggles to find a foothold, trades near 1.3150](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-157771037_XtraSmall.jpg)
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
![Gold retreats toward $2,500 ahead of the weekend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
![Week ahead – Investors brace for NFP amid Fed rate cut speculation](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/america-back-to-work-gm178972493-25143312_XtraSmall.jpg)
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
![Easing Eurozone inflation to back an ECB rate cut in September](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/Eurozone/eu-flags-flying-at-the-european-commission-building-brussels-belgium-24759579_XtraSmall.jpg)
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.