Fundamental
Overview
The USD weakened across the
board on renewed risk-off sentiment apparently caused by concerns around bad regional
bank loans and some stress in money market rates. Moreover, the weakness in US
equities contributed to depress Treasury yields as markets increased rate cut
bets.
The US government shutdown
continues to delay many key US economic reports. The dollar “repricing trade”
needs strong US data to keep going, especially on the labour market side, so
any hiccup on that front is likely to keep weighing on the greenback.
The BLS announced last week
that despite the shutdown, it will release the US CPI report on October 24, so
that’s going to be a key risk event. That will need to be seen in the context
of US-China relations and any negative shock by that time though. If things go
south, then the CPI will not matter much as growth fears will trump everything
else.
On the EUR side, the single
currency found support this week as the French political risk eased after Lecornu
survived the no-confidence vote. On the monetary policy side, nothing has
changed. The ECB is not expected to adjust rates for a long time unless we get
significant deviation from their inflation target. In fact, the vast majority
of ECB members is comfortable with the current rate setting and will not
respond to small or short-term deviations from their target barring a clear
shock in the economy.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD broke above the major trendline and extended the rally as the
buyers piled in more aggressively. The target for the buyers should be around
the 1.1831 level with a break above that resistance opening the door for a new cycle
high. If the price gets there, we can expect the sellers to step in with a
defined risk above the 1.1831 level to position for a drop back into the 1.16
handle.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, there’s
not much we can glean from this timeframe, so we need to zoom in to see some
more details.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline
defining the current bullish momentum. The buyers will likely lean on the trendline
to keep pushing into new highs, while the sellers will look for a break lower
to pile in for a drop back into the 1.16 support. The red lines define average daily range for today.
Upcoming
Catalysts
We don’t have anything
on the agenda today with the focus remaining on US-China developments and now
on regional banks and money market rates.
This article was written by Giuseppe Dellamotta at investinglive.com.