Last week's trading was the most important for the bears' greater control over the direction of the currency pair EUR/USD. Losses affected the support level of 1.0488, the lowest for the currency pair in ten months. The week's trading closed around the level of 1.0575, and the performance this new week is awaiting the announcement of the important and influential US job numbers. Policymakers from Washington to Frankfurt head into the final quarter of 2023 with tentative reasons for optimism that their fight against inflation is making progress. In this regard, US Federal Reserve Chairman Jerome Powell and his counterpart at the European Central Bank, Christine Lagarde, are scheduled to speak this week, and investors will be examining their reaction to the transatlantic double whammy of data that provided hints of cheer.
Reports last Friday showed that core inflation in the euro zone - which excludes volatile items such as energy - was at its slowest pace in a year, and hours later, it was revealed that the US Federal Reserve's preferred measure of core price growth had risen at least in a year. 2020. With a US government shutdown avoided on Saturday, global central bankers are set to see another round of this data series, as well as other inflation figures, before their decision on November 1. Refrain from raising interest rates in November.
The ECB will only have a full version of September's inflation figure before its meeting on October 26, with the October report and third-quarter growth estimates set after the meeting. A further increase in borrowing costs is not currently expected in October, and Friday's report could begin to undermine any push for an ECB hike in December.
Powell will join Philadelphia Fed President Patrick Harker in a roundtable discussion with workers and small business leaders on Monday. Regional Fed Presidents Loretta Mester, Raphael Bostic and Mary Daly are also scheduled to speak next week. Lagarde, president of the European Central Bank, will deliver her welcome speech next Wednesday at a conference hosted by her institution. Vice President Louis de Guindos will speak on the same day in Cyprus, and other speakers this week include chief economist Philip Lane and central bank governors from Germany and France.
Regarding expectations for the euro against the dollar in the coming period:
Rabobank lowered its forecast for the euro-dollar exchange rate (EURUSD) amid increasing pressures on the European economy, which means that the euro zone is falling into recession before the United States of America. To be sure, the US is also still expected to slide into recession – with economists at Rabobank expecting that to happen in early 2024 with the impact of interest rate hikes – but this may ultimately continue to support the dollar via a “risk off” channel. In this regard, Jane Foley, senior forex analyst at Rabobank, says: “The US dollar is likely to remain well supported until the market gains the confidence to return to higher-risk assets.”
The call comes amid a deterioration in sentiment among investors as they come to grips with the idea that the Fed is unlikely to cut US interest rates by roughly the amount previously expected in 2024, creating a safe-haven demand that has helped the dollar rise against the US dollar and the majority of currencies.
Expectations for the euro against the dollar today:
- It is truly an important trading week, as the bears will have the opportunity to record lower levels for the currency pair EUR/USD if the US job numbers and the statements of US Central Bank officials are supportive of further tightening and more US interest rate hikes.
- Breaking the support at 1.0500 will give them the next move towards deeper support levels of 1.0460 and 1.0580, respectively, which are already sufficient to push all technical indicators towards strong oversold levels.
- On the other hand, according to the performance on the daily chart below, there will be no break of the downward trend for the euro against the dollar without moving towards the resistance levels of 1.0770 and 1.0850 again.
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