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Euro looks to extend the uptick ahead of Lagarde speech, US data


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  • The Euro alternates gains with losses against the US Dollar.
  • European stocks keep the mixed performance so far.
  • ECB President Christine Lagarde speaks later in the session.

The Euro (EUR) now trades in a vacillating fashion against the US Dollar (USD), motivating EUR/USD to fade the initial bull run to the 1.0860 zone and refocus on the mid-1.0800s on Thursday.

The Greenback also navigates without clear direction around 104.40 when tracked by the USD Index (DXY) amidst declining US yields across the board and firmer market chatter around the start of interest rate cuts by the Federal Reserve (Fed) at some point in the summer of 2024.

Speculation about potential Fed rate cuts has been magnified following weaker-than-estimated inflation measures (CPI and PPI) published earlier in the week.

There is no macro data in the domestic calendar, but ECB President Lagarde will speak at an event in Frankfurt.

Across the ocean, weekly Initial Jobless Claims are due along with the Philly Fed Manufacturing Index, Industrial Production, and the NAHB Housing Market Index.

Daily digest market movers: Euro looks to consolidate the recovery   

  • The EUR wobbles near 1.0850 against the USD.
  • US and German yields trade on the defensive on Thursday.
  • Market participants speculate that the Fed could cut rates in H1 2024.
  • Investors favour a protracted pause by the ECB.
  • Rumours of FX intervention keep gyrating around USD/JPY.
  • ECB’s Andrea Enria, Luis De Guindos and Christine Lagarde speak later.
  • US weekly Initial Claims and Philly Fed index take centre stage.
  • Australia saw a strong labour market report in October.

Technical Analysis: Euro’s outlook appears bullish above 1.0803

EUR/USD advances modestly on Thursday, returning at the same time to the upper end of the recent range.

The November peak of 1.0887 (November 14) emerges as the next target of note for EUR/USD prior to the weekly high of 1.0945 (August 30) and the psychological level of 1.1000. The breakout of this area might pave the way for a visit to the August top of 1.1064 (August 10) and another weekly peak of 1.1149 (July 27), all preceding the 2023 high of 1.1275 (July 18).

Occasional bouts of weakness may cause the pair to test temporary support at the 55-day Simple Moving Average (SMA) at 1.0639, before the weekly low of 1.0495 (October 13) and the 2023 low of 1.0448. (October 15).

Looking at the bigger picture, the pair’s outlook should continue positive as long as it remains above the 200-day SMA at 1.0803.

ECB FAQs

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.