EUR/USD pulls back from highs with traders awaiting US official data | FXStreet
EUR/USD shows marginal losses on Wednesday, trading at session lows near 1.1670 at the time of writing, after peaking above 1.1600 on Tuesday. Investors are reluctant to take excessive risks during the European session, awaiting the US Congress to pass the bill that will restore the US government funding, and the release of a batch of US official figures, for a better assessment of the country’s economic momentum.
Germany’s Harmonized Index of Consumer Prices (HICP), released earlier on Wednesday, confirmed the preliminary estimations, revealing that consumer inflation remains steady in October at levels broadly in line with the European Central Bank’s (ECB) target for price stability. Wholesale Price Index MoM ticked up last month, according to data by Destatis. All in all, endorsing the central bank’s monetary policy stance.
Figures released by ADP on Tuesday showed a net loss in private employment of 11,250 jobs in the four weeks ending October 25. The report restated the deterioration of the US labour market, adding pressure on the Federal Reserve (Fed) to lower borrowing costs further at its December meeting, and weighed down on the US Dollar.
In Wednesday’s economic calendar, ECB Vice President Luis De Guindos and board member Isabel Schnabel will provide some distraction during the European session, while in the US, a slew of Fed speakers might comment on the latest news on employment and give further insight into the bank’s rate path.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.29% | 0.50% | 0.04% | -0.08% | 0.00% | -0.11% | |
| EUR | -0.10% | 0.20% | 0.39% | -0.06% | -0.18% | -0.10% | -0.21% | |
| GBP | -0.29% | -0.20% | 0.20% | -0.25% | -0.37% | -0.29% | -0.40% | |
| JPY | -0.50% | -0.39% | -0.20% | -0.46% | -0.58% | -0.50% | -0.61% | |
| CAD | -0.04% | 0.06% | 0.25% | 0.46% | -0.13% | -0.05% | -0.15% | |
| AUD | 0.08% | 0.18% | 0.37% | 0.58% | 0.13% | 0.08% | -0.03% | |
| NZD | -0.00% | 0.10% | 0.29% | 0.50% | 0.05% | -0.08% | -0.11% | |
| CHF | 0.11% | 0.21% | 0.40% | 0.61% | 0.15% | 0.03% | 0.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: The US Dollar weakens as Fed easing hopes grow
- The US Dollar is showing a mild bearish tone this week, with investors assuming that official US data will force Fed policymakers to prioritize the labour market over inflation, which confirms the need for a further interest rate cut in December. The US Dollar is extending its pullback from last week’s highs, and the Euro (EUR) is drawing support from that.
- German inflation data released on Wednesday confirmed that the HICP grew at a 0.3% pace in October and at 2.3% in the last 12 months, slightly below the 2.4% yearly inflation seen in September.
- Likewise, the German Consumer Price Index accelerated to 0.3% in October from 0.2% in September, although the yearly rate eased to 2.3% from the previous month’s 2.4% reading.
- Wholesale Price Index, on the other hand, grew 0.3% in October in Germany, from 0.2% in September, beating expectations of a 0.1% growth. Year-on-year, the index eased to 1.1% from 1.2% in the previous month.
- The US ADP Employment Change 4-week average revealed that businesses shed an average of 11,250 jobs per week up to October 25, providing further reasons for Fed doves to cut interest rates further.
- In Europe, the German ZEW Survey disappointed market expectations on Tuesday. The sentiment about the German economic outlook declined to 38.5 in November from 39.3 in October, against expectations of an improvement to 40. The Current Situation has improved to -78.7 from -80, yet short of the market expectations of a -77.5 reading.
Technical Analysis: EUR/USD approaches trendline resistance at 1.1615
EUR/USD has been appreciating continuously during the last five days. Technical indicators on the 4-hour chart are pointing higher, with the Relative Strength Index (RSI) in the area of 60 and the Moving Average Convergence Divergence (MACD) printing green histogram bars, although bulls are likely to be challenged above 1.1600.
Price action is nearing the top of the descending channel from early October highs, now around 1.1615, which will meet the price near a previous support, in the area of 1.1620-1.1625 (October 28 low). The pair should break those levels to cancel the broader bearish trend and shift the focus towards the October 28 and 29 highs near the area of 1.1670.
Downside attempts are being contained above the 1.1575 session lows for now. Further down, EUR/USD might find support at the 1.1530-1.1540 area (near November 7, 10 lows) ahead of the 1.1500 psychological level and the key support at the November 5 low around 1.1470.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.