EUR/USD is trading flat as markets brace for Fed Powell’s speech | FXStreet

EUR/USD remains practically flat, right above one-month lows at 1.1600. The pair trades at 1.1615 at the time of writing, with upside attempts finding sellers, as France’s political uncertainty keeps investors on their toes. The focus now turns to the speeches of Federal Reserve (Fed) Chair Jerome Powell, who is expected to take the stage at a banking event in Washington.

Earlier on Thursday, New York Fed President John Williams showed support for further monetary easing in the coming months in an interview at The New York Times, endorsing market expectations of two more rate cuts this year. Williams stated that underlying inflation is moving gradually lower, while, in his opinion, signs of a slowdown in employment warrant attention.

In Europe, the European Central Bank’s Monetary Policy Meeting Accounts revealed an increasing concern about the uncertain global context, although policymakers consider that there is no immediate pressure to change the bank’s policy. Regarding inflationary risks the committee has shown some divergence, with some members observing upside risk to inflation while others see price pressures abating. The impact of the accounts on the Euro has been marginal.

Daily digest market movers: Improving mood offers respite for the Euro

• A somewhat brighter market sentiment has given some respite for the Euro on Thursday, but the negative trend remains intact. French President Macron is expected to appoint a new Prime Minister, but he will face the same challenges as the previous five PMs to solve the country’s budget problems.
• France’s outgoing Prime Minister (PM) Sébastien Lecornu calmed markets on Wednesday, stating that President Emmanuel Macron would announce a new PM in the next 48 hours and dismissing the opposition calls for new elections as, he said, there is no majority in the parliament for that.
• Darta released on Thursday showed that German Trade Balance recorded a larger-than-expected surplus of EUR 17.2 billion in August, from EUR 14.2 billion in July. However, the increase was mainly due to a 1.3% drop in imports, which offset a 0.5% decline in exports, which fell against expectations for the second consecutive month.
• These figures come after a 4.3% decline in German Industrial Production in August, as reported on Wednesday, to confirm the soft momentum of the region’s leading economy, adding pressure to an already weak Euro
• In the US, the Government shutdown enters its eighth day with a lack of progress to restore funding, while news from the Federal Reserve (Fed) is the main fundamental driver amid the absence of key economic data releases.
• On Wednesday, the Minutes of September’s Fed monetary policy meeting confirmed on Wednesday the divergence among policymakers on how much easing is needed to support economic growth without boosting inflation. The dot-plot, included in the Fed’s Summary of Economic Projections released on September 17, showed a 10 to 9 vote for at least two more rate cuts this year.
• On the geopolitical front, Israel and Hamas have agreed to a ceasefire that is expected to lead to the release of the hostages and the reconstruction of war-torn Gaza. Although the agreement seems fragile, it has so far contributed to improving the market mood.

Technical Analysis: EUR/USD remains close to the 1.1600 support area

EUR/USD rallies are finding sellers, keeping the bearish trend in play. Previous support at 1.1650 is limiting upside attempts, with the 1.1600 support area dangerously close. The Relative Strength Index (RSI) remains well below 50, showing a significant bearish pressure.

The rejection at 1.1650 confirms that bears remain in control, although the support level at the 1.1600 area, where Wednesday´s lows meet the trendline support, is likely to be a tough one. Further down, the target would be the August 22 and 27 lows, near 1.1575, and then the August 5 low at 1.1530, although this latter level seems out of reach for on Wednesday.

Immediate resistance is at the 1.1645-1.1650 area (September 25 and October 6 lows), ahead of the descending trendline resistance, now around 1.1720. A break of this level would suggest a trend shift and bring last week’s highs at the 1.1765-1.1775 area into focus.