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EUR/USD has reached a new 17-month low. The pair fell towards 1.1150 yesterday and is trading near 1.1157 this morning, below the important 1.1200 level. Rising energy costs, elevated US yields, and concern over French public finances continue to favour the Dollar over the Euro. The longer-term bearish trend remains intact, and this fresh low will keep EUR/USD in focus for trend traders looking for short trading opportunities. I have been short here for a while - this currency pair has historically tended to trend very reliably.
The US Dollar remains strong generally. The greenback is holding near its strongest level in a year and a half as renewed attacks on energy infrastructure in the Middle East and Ukraine increase geopolitical and inflation risks. GBP/USD is near 1.3220, while USD/JPY is trading at about 158.30. The Dollar’s strength is therefore not confined to the Euro, although European fiscal concerns are contributing to EUR/USD’s weakness, so it is most obvious there with the Euro showing long-term weakness.
Tomorrow’s US CPI (inflation) data release is the most important scheduled event this week, in fact probably this month excepting the Fed meeting. September headline inflation is expected to rise towards 3.6%–3.7% annually, from 3.4%, largely because of higher energy prices. The core monthly reading will probably matter more for Fed expectations: an increase around 0.2% would be relatively reassuring, while a stronger result could revive the prospect of another October hike. The release is due at 12:30 GMT tomorrow.
Markets still expect an October Fed rate hold. Expectations of an immediate hike remain low following September’s weak employment report, with pricing recently implying only about a one-in-five to one-in-four chance of an increase. This does not mean the Fed has finished tightening; it means traders currently see more scope for policymakers to wait. A hotter than expected CPI reading could change that assessment quickly.
US stocks finished mixed yesterday, with technology shares weaker. The S&P 500 slipped about 0.06%, the Dow Jones Industrial Average gained approximately 0.38%, and the Nasdaq Composite fell 0.44%. The Nasdaq 100 Index notably declined by around 0.78% to its lowest level this month. This is not a uniform stock-market selloff, but the weakness in the technology sector is notable after its recent record highs.
Asian technology shares have fallen sharply today. Regional equity losses have been led by chipmakers, with concern over the AI trade extending yesterday’s Wall Street decline.
WTI remains well above the $87.68 support level. Crude oil recovered strongly yesterday, and WTI is trading near $92.70 this morning despite a modest pullback. The defense of support remains intact, but bulls now need to establish a sustained move, although they have already pushed the price above the short-term descending trend line, which is a minor bullish sign. Renewed Saudi attacks and threats to Hormuz shipping mean this remains a highly headline-sensitive market.
Bitcoin has recovered after briefly losing $82,000. It fell below $81,000 early today before rebounding above $83,000. The recovery is encouraging, and technically, although the price action is a bit less bullish, the price action is still consolidative leaving a major bullish breakout on the table. The picture with Ethereum is technically weaker and more bearish after it looks to have taken a step lower in its price action, meaning if you are going to be long one of these coins, Bitcoin looks likely to be the better bet.
Ethereum has broken below its previously identified support. Ether is around $2,500, beneath $2,544, making its former bullish consolidation substantially less convincing. A sustained recovery above $2,544 would improve the picture; until then, the earlier prospect of a breakout above $2,800 looks more remote.
There are no high impact data items scheduled for release today.