- The Euro loses further ground against the US Dollar.
- European stocks keep the mixed bias on Monday.
- ECB-speakers, US Factory Orders next on tap.
The Euro (EUR) remains under selling pressure against the US Dollar (USD) on Monday, motivating EUR/USD to revisit the mid-1.0800s at the beginning of a new trading week.
The Greenback, on the other hand, appears mildly bid around 103.40 when measured by the USD Index (DXY), partially fading the earlier uptick to the vicinity of the key 200-day SMA near 103.60.
Considering the broader economic landscape, investors consider potential interest rate reductions by both the Federal Reserve (Fed) and the European Central Bank (ECB) in the spring of 2024.
In the Eurozone docket, Germany’s trade surplus widened to €17.8B in October. Later in the session, ECB’s Vice Chair of the Supervisory Board Frank Elderson and President Christine Lagarde are due to speak.
Across the ocean, US Factory Orders for the month of October will be in the limelight.
Daily digest market movers: Euro succumbs to further Dollar gains
- The EUR starts the week on the defensive against the USD.
- US and German yields trade in a mixed note.
- Investors see the Fed reducing its rates in Q2 2024.
- The ECB could start cutting rates in the spring of 2024, according to markets.
- ECB’s Vice President Luis De Guindos reiterated the bank’s data-dependent stance.
- EMU Sentix Index improved a tad to -16.8 in December.
- Lagarde will speak later in the session, around 14:00 GMT.
Technical Analysis: Euro’s positive outlook remains unchanged above the 200-day SMA
EUR/USD kicks off the new week with a modest retracement, although it still manages to keep the trade above the key 200-day Simple Moving Average (SMA) at 1.0818.
If the EUR/USD continues to experience further losses, it could potentially face the mentioned 200-day SMA as an initial point of support. In the event of a breach, the 55-day SMA at 1.0682 is likely to provide temporary support. However, if this level is also cleared, it would expose the weekly low of 1.0495 (October 13), followed by the 2023 low of 1.0448 (October 3) and the psychological level of 1.0400.
If there are occasional bullish attempts, they are likely to encounter immediate resistance at the November peak of 1.1017 (November 29). This is followed by the August high of 1.1064 (August 10) and another weekly top of 1.1149 (July 27). These levels act as hurdles before reaching the 2023 peak of 1.1275 (July 18).
The pair is anticipated maintaining its bullish outlook while remaining above the 200-day SMA.
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.
Source: https://www.fxstreet.com/news/euro-remains-under-pressure-near-10850-ahead-of-ecb-speak-202312040905