Fundamental
Overview
The USD came under some
pressure on Friday as the risk-off sentiment caused by Trump’s threat of
substantially increasing tariffs on China weighed on Treasury yields. Over the
weekend, we had more soothing comments from Trump and other US officials which
triggered a recovery in risk sentiment.
The positive mood is
weighing a bit on the greenback amid lack of bullish catalysts. Domestically,
nothing has changed for the US dollar as 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 market pricing shifted
more dovish with 47 bps of easing by year-end and 115 bps cumulatively by the
end of 2026. The BLS announced last week that it will release the US CPI report
despite the shutdown on October 24, so that’s going to be a key risk event. In
case we get hot data, we will likely see a hawkish repricing in interest rates
expectations with the December cut being priced out. Conversely, a soft report
shouldn’t change much in terms of pricing, but it will likely weigh on the
greenback anyway.
On the EUR side, the single
currency came under some pressure last week following the resignation of the
French PM Lecornu on Monday. Just four days later though, Lecornu was
reinstated as French PM and announced a new cabinet. He will now have to
present a 2026 draft budget before the deadline tomorrow. That will give
parliament the required 70 days to scrutinise the plan.
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 couldn’t sustain the break below the key support zone around
the 1.16 handle. The price rose back above the support zone and the buyers will
now look to pile in for a rally back into the 1.18 handle. The sellers, on the
other hand, will want to see the price breaking lower again to position for a
drop into the 1.14 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
that we some consolidation right above the key support zone. This is where we
can expect the buyers to step in with a defined risk below the zone to position
for a rally into the trendline. The sellers, on the other hand, will want to
see the price breaking lower to pile in for a drop into the 1.14 handle next.
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 support
zone and the trendline to keep pushing into new highs, while the sellers will
look for a break lower to increase the bearish bets into new lows. The red
lines define average daily range for today.
Upcoming
Catalysts
This week is going to be very light again in
terms of data releases given the US government shutdown. Data like Retail Sales
and Jobless Claims won’t be released. We will have lots of Fed speakers though
with Fed Chair Powell scheduled for tomorrow. Given the lack of key US data
though, it’s very unlikely to see a change in stance. For now, we know that
only the US CPI will be published despite the shutdown, which is scheduled for
Friday October 24.
This article was written by Giuseppe Dellamotta at investinglive.com.