Euro and Dollar Responses to Global Economic Tensions

There will still be significant doubts as to whether markets will take any attention, but the euro was resilient again and the EUR/USD exchange rate traded just below 1.0700 on Monday. The Fed’s forecast will also be key, although the speakers’ calendar will be relatively light over the next few days. According to the Federal Reserve Bank of San Francisco Dali, if financial conditions ease further, the Fed will have to pay attention and if inflation does not subside further, it will likely be forced to tighten policy again. Given the importance of the data for Fed policy, there will remain an important element of caution ahead of Tuesday’s U.S. consumer price inflation data. Even if we deal with a lower CPI reading, the Fed is likely to continue to fend off hopes of a rate cut because it is not in its interest to just consider cutting interest rates, let alone mention it while inflation remains above target.” Globally, the reaction to Moody’s downgrade to negative from stable will be significant and the USD /JPY exchange rate will also be significant given the possibility of the Bank of Japan’s intervention near 152.0. Tuesday’s US inflation release could be interesting, as the trend of declining inflation in the US seems to be driving countries such as the UK and the EU. The headline figure is expected to fall to 3.3%, which is close to the Fed’s inflation target of 2% despite slightly higher readings in the past two months. This suggests that the Bank of England is right to be patient as the trend is generally lower and interest rates are high enough.

Euro Decline: Technical Challenges and the Impact of Monetary Statements

The euro initially tried to rally during Monday’s trading session, but then lost a certain amount of momentum to show signs of hesitation. We sit just above the 50-day moving average, which is of course an area that has been supporting several times already. If we break below the 50-day EMA, we can continue to fall from there and go down to 1.06 below. Below that, we have the bottom of the descending flag which was very important for this market, which could be the target above all. On the other hand, if we shift and break through the 200-day EMA to the other side, it is possible that the market could try to break through the 1.0750 level. Getting rid of this would open up a great deal of bullish pressure and possibly even potential “FOMO trading” that could send the market to the 1.10 level in the long run. Moreover, you should also see a great deal of hype between the 50-day EMA and the 200-day EMA, which is typical for traders. Technicians and their systems to get a little noise in this area. Keep an eye on the Federal Reserve, and any statements from Fed members, as traders pay close attention to the course of monetary policy coming from the United States, which may remain tight for much longer than expected. Moreover, we also have that the ECB is likely to listen to monetary policy much faster than the Federal Reserve. This is supposed to continue to favor the US dollar, which also enjoys some support due to the idea that the US dollar is the “safety currency”, and with the world being what it is at the moment, it is likely that we will do so. Continue to see more bearish pressure. Overall, expect a lot of noisy trading, as there is a lot of uncertainty at the moment.

Tensions in EUR/USD movements await key economic data

The euro is looking forward to the 1.0700 level against the US dollar in early trading with little news or sentiment that could lead to this move being taken or broken. The US dollar was slightly weaker at the start of the week, while risk sentiment remained steady after last Friday’s noticeable risk movement. This week sees the release of the latest inflation reports in the Eurozone and the US, along with growth in the Eurozone and German sentiment. All of these data releases have market-moving potential, especially CPI reports after Chairman Powell doubled down on the Fed’s fight against inflation last week. In addition to the above economic data, there are 18 Fed speeches this week across a variety of events. Speakers include John Williams, Michael Barr, Loretta Mester, Lisa Cook and Susan Collins. Traders should be aware of the scheduled time for the issuance of these letters and take note of any monetary comment. The EUR/USD pair is currently in the middle of three simple moving averages, with the 20-day and 5-day SMAs providing support, while the 200-day SMA is at the top and acting as resistance. EUR/USD support is seen in the area between 1.0610 (38.2% Fibonacci retracement) and horizontal support at 1.0635 with the two moving average lines in the middle. There are a few recent highs between 1.0750 and 1.0768 Which protects the 200-day moving average at 1.0801. The euro’s moves come as the European Central Bank tries to balance high borrowing costs with the risk of a painful recession. ECB President Christine Lagarde indicated on Friday that despite the massive drop in inflation, the ECB will not cut interest rates in the next two quarters.

Dollar Rises: Rising Interest Policy Tensions and Euro Weakens

The dollar index, a measure of the dollar’s strength against a basket of 6 currencies, rose 0.80% during the week ended November 10, as aggressive monetary policy comments by Fed spokespersons forced markets to trim expectations of a rate cut. The dollar’s rally has been steady throughout the week, with the dollar index rising from a low of 104.85 touched on Monday to a high of 106.01 on Friday. However, the index closed slightly lower at 105.86, versus 105.02 the previous week. The dollar’s recovery was primarily driven by hawkish comments from the Fed during the week. Recent Fed speakers have struggled to hint that it is not yet time to confirm the end of the Fed’s tightening cycle and that fighting inflation remains challenging. Federal Reserve Chairman Jerome Powell said Thursday that the Fed is not confident that it has done enough to reduce inflation. He also warned that the Fed would not hesitate to raise interest rates if it became appropriate to tighten policy. Ten-year U.S. bond yields rose to 4.646% from 4.576% the previous week, reflecting market concern that interest rates will remain higher longer than expected, accelerating the dollar’s rise. The euro fell nearly half a percent against the US dollar during the week of November 6-10, prompting the EUR/USD pair to close the week at 1.0681, versus 1.0729 the previous week. The pair’s price ranged from a high of 1.0757 traded on Monday to a low of 1.0655 traded on Friday.

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