EUR/USD remains vulnerable amid generalised US Dollar’s strength

EUR/USD has been rejected at a previous low in the area of 1.1540 earlier on Monday, before depreciating further, to reach fresh three-week lows, at 1.1515 at the time of writing. The confirmation that Eurozone manufacturing activity improved to a standstill in October has failed to provide any significant support to the pair, which remains on its back foot since the Federal Reserve (Fed) and the European Central Bank (ECB) released their monetary policy decisions last week.

The Fed Chairman, Jerome Powell, played down market expectations that the bank would lower borrowing costs further in December, curbing investors’ appetite for risk and triggering a US Dollar rally that has extended into the start of the current week.

In Europe, October’s HCOB Manufacturing Purchasing Managers’ Index confirmed the preliminary estimations, pointing to a slight improvement of the sector’s activity, to a level of 50.0 from 49.8 in September. These figures come shortly after the President of the Deutsche Bundesbank and European Central Bank’s Monetary Committee member Joachim Nagel affirmed on Monday that economic data is not diverging from the central bank’s projections, but that all options remain open for the next meeting.

Investors’ mood remains cautious, with all eyes on the final release of the Eurozone Manufacturing Purchasing Managers Index (PMI) for October, due at 09:00 GMT on Monday, and the US ISM Manufacturing PMI, due later in the day. Beyond that, ECB board member Phillip Lane is expected to meet the press during the European session, while, in the American trading session, Fed officials Mary Daly and Lisa Cook might provide further insight into the bank’s monetary policy plans.

Daily digest market movers: The cautious market mood favours the US Dollar

• The US Dollar remains steady near recent highs with investors still reluctant to take excessive risks. The hawkish comments by Fed Chairman Jerome Powell on Wednesday have forced investors to dial down bets on further monetary policy easing this year, which curbed risk appetite, triggering a three-day rally for the US Dollar. last week
• The chances of a 25-basis-point Fed interest rate cut in December have declined to 67% on Monday from beyond 90% before the Federal Reserve’s meeting, as data from the CME Group’s Fed Watch Tool shows.
• In Europe, Eurozone Manufacturing PMI figures have confirmed the preliminary estimations that the sector’s activity improved to a standstill,
• Likewise, German PMI data validated the Flash PMI figures, showing a mild increase to 49.6 from the previous month’s 49.5, still at levels below 50, pointing to contraction.
• Manufacturing figures from France have beaten expectations, improving to 48.8, beyond the 49.3 seen in the flash estimate. Italian PMI rose to 49.9, well above the 49.0 preliminary reading, and Spanish manufacturing PMI has shown a faster-than-forecasted growth, to 52.1 from the 51.5 figure anticipated in late October.
• Later on the day, the ISM Manufacturing PMI will gain particular relevance as private data remains the main source to assess the macroeconomic background, as the US government shutdown enters its fifth week. The ISM Manufacturing PMI is seen improving to 49.2 in October, from 49.1 in September, with the Prices Paid sub-index increasing to 62.6 from 61.9, adding to evidence of inflationary pressures stemming from higher tariffs.
• Also on Wednesday, the US S&P Global Manufacturing PMI might confirm an improvement to 52.2 in October, from the 52.0 reading released in September, as preliminary data advanced.

Technical Analysis: EUR/USD breaks below 1.1530 support level

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The EUR/USD broke the bottom of the monthly triangle pattern last week, giving fresh hopes for bears, and extended losses below the 1.1530 area on Monday. The bias is strongly negative. The 4-hour Relative Strength Index (RSI) is at low levels but still above the oversold area, and the Moving Average Convergence Divergence (MACD) histogram keeps printing red bars.

Upside attempts are likely to be seen as good entry options for bears. Previous supports at 1.1530 (October 31 low), and 1.1550 (October 30 low) are holding bears for now, ahead of the October 22 and 23 lows at 1.1580. An unlikely confirmation above this level would shift the focus towards the October 30 low, near 1.1625.

On the downside, below the mentioned 1.1530, the measured target of the triangle pattern lies near the 261.8% retracement of the October 23-28 bullish run, near 1.1440. Further down, the August 1 low lies at 1.1390.