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.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.