- EUR/USD rises moderately above 1.0800 as investors await an array of macroeconomic data from the US and the Eurozone this week.
- US JOLTS Job Openings are estimated to have declined marginally in September.
- Traders doubt over the size of the ECB’s likely interest rate cut in December.
EUR/USD gains slightly near the round-level figure of 1.0800 in Tuesday’s European session. The major currency pair consolidates as the US Dollar (USD) clings to gains ahead of an array of United States (US) macroeconomic data this week and increasing uncertainty over the US presidential election, which will take place on November 5.
US Personal Consumption Expenditure Price Index (PCE) data for September, flash Q3 Gross Domestic Product (GDP), Nonfarm Payrolls, and ISM Manufacturing Purchasing Managers’ Index (PMI) data for October are lined up for release. The data will be key to influencing market expectations for the Federal Reserve’s (Fed) interest-rate path for the remainder of the year.
Economists expect the US economy to have created half of the jobs it added in September, the Manufacturing PMI to remain below the 50.0 threshold, inflation to have fallen slightly and the GDP to have expanded at a steady pace of 3% on an annualized basis.
Slower job growth would likely support market expectations for Fed interest rate cuts in December. Markets are pricing in a reduction in borrowing rates by 25 basis points (bps) in November and December, according to the CME FedWatch tool.
In Tuesday’s session, investors will focus on the US JOLTS Job Openings data for September, which will be published at 14:00 GMT. Job vacancies are estimated to have dropped marginally to 7.99 million from 8.04 million in August.
Daily digest market movers: EUR/USD consolidates as investors await US JOLTS Job Openings
- EUR/USD has stayed in a limited range near 1.0800 in the last six trading days. The Euro (EUR) struggles for a direction as investors look for fresh cues about the size of the European Central Bank’s (ECB) likely interest rate cut in the last monetary policy meeting of the year in December.
- The ECB is widely anticipated to cut Its Deposit Facility Rate again but traders doubt whether the central bank will continue the rate-cut cycle with the usual pace of 25 basis points (bps) or go for a larger trim. Market expectations for an ECB large rate cut increased after a few officials highlighted the risks of inflation remaining below the desired rate of 2%.
- The likelihood of the German economy ending the year with an economic recession has been a major reason behind the doubts about low inflation. For more cues on German and Eurozone economic growth, investors will pay close attention to the flash Q3 GDP for both economies, which will be published on Wednesday.
- Economists estimate the German GDP to have contracted by 0.3% in Q3 compared with the same quarter a year earlier after remaining flat in Q2. In the same period, the Eurozone GDP is estimated to have expanded by 0.8%, faster than the former reading of 0.6%.
- On the same day, investors will also focus on the preliminary German and Spain Harmonized Index of Consumer Prices (HICP) data for October. Annual German HICP is expected to have grown at a faster rate of 2.1%, while inflation in Spain is estimated to have remained below 2%.
Technical Analysis: EUR/USD remains below 200-day EMA
EUR/USD continues to hold above the upward-sloping trendline near 1.0750, which is plotted from the October 3, 2023, low at around 1.0450 on the daily time frame. However, the broader outlook of the major currency pair remains bearish as it stays below the 200-day Exponential Moving Average (EMA), which trades around 1.0900.
The downside move in the shared currency pair started after a breakdown of a Double Top formation on the daily time frame near the September 11 low at around 1.1000, which resulted in a bearish reversal.
The 14-day Relative Strength Index (RSI) ticks up but remains in the 20.00-40.00 range, pointing to more downside ahead.
On the downside, the major pair could see more weakness towards the round-level support of 1.0700 if it slips below 1.0750. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000, emerge as key resistances.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Source: https://www.fxstreet.com/news/eur-usd-ticks-up-ahead-of-us-jolts-job-openings-data-202410290943