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- EUR/USD began the week on the negative side, holding lower ground near one-week bottom of late.
- Fears of Eurozone recession intensified after record high inflation data, unimpressive GDP figures.
- Hawkish hopes from ECB fail to defend pair buyers as USD benefits from rush to risk safety.
- US ISM PMI, JOLTS Job Openings will decorate calendar ahead of Wednesday’s FOMC.
EUR/USD steadies inside a 20-pip trading range below 0.9900 following a downbeat start to the central bank’s week. In doing so, the major currency pair seesaws around a one-week low.
Monday’s risk-aversion joined fears of more economic hardships for the old continent to exert downside pressure on the EUR/USD prices. The same stopped the quote to cheer hawkish expectations from the European Central Bank (ECB) and the multi-year high inflation data.
On Monday, the preliminary readings of the Eurozone’s third quarter (Q3) Gross Domestic Product (GDP) matched 0.2% QoQ forecasts versus 0.8% prior. Further, the bloc’s first readings of inflation data for October, per the HICP measure, jumped to 1.5% MoM versus 0.6% expected and 1.2% previous readings. On a yearly basis, the Eurozone HICP rallied to 10.7% compared to 9.8% prior and 10.2% market consensus.
Elsewhere, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.
It should be noted that Russia’s retreat from the grain deal with the United Nations, Turkey and Ukraine joined the fresh wave of covid lockdowns in China to weigh on the market’s sentiment. Also, fears of higher rates and strong inflation were persistent and helped the US dollar to remain firmer.
With this, the US equities began the week on the negative side while yields recovered, which in turn underpinned the US Dollar Index (DXY) to print a three-day uptrend.
That said, traders await the US activity data for October before Wednesday’s all-important Federal Open Market Committee (FOMC) meeting. Among them, the US ISM Manufacturing PMI, expected to ease to 50.0 versus 50.9 prior, will be more important to watch. Additionally, The US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain the pair traders.
Given the hawkish hopes from the Fed, as well as the economic and geopolitical fears surrounding Eurozone, the EUR/USD pair is likely to remain weak.
Technical analysis
EUR/USD seesaws around the previous resistance line from March 31 and the 50-DMA while taking rounds to 0.9880-90. Given the downbeat RSI and the pair’s pullback from the 100-DMA hurdle, around 1.0075 at the latest, the quote is likely to remain weak, which in turn highlights the 0.9830 support confluence, including the 21-DMA and monthly ascending trend line to watch as the next rest-point.