- As this week's trading begins, the technical setup for the EUR/USD exchange rate is considered bullish and calls for further gains in the coming days, but progress will be tested by speeches from central bank presidents Jerome Powell and Christine Lagarde in addition to some important German industrial production numbers.
- Recently, the price of the EUR/USD currency pair jumped at the beginning of this week towards the 1.0756 resistance level.
- Lately, its highest level in nearly two months, and is stable around the 1.0720 level at the time of writing the analysis, awaiting anything new.
Risk-Related Assets and Stocks Higher
On the other side, the upward recovery gains for the most famous pair in the Forex currency market increased after the release of US Labor market data. Obviously, the actual data came less than expected and which indicates that the US economy was calming enough for the Federal Reserve to confidently exit the cycle of raising interest rates. Therefore, the possibility of a US interest rate cut in 2024 has increased and affected US bond yields, boosting stocks and risk-related assets such as the euro.
EUR/USD gains were supported by a short-term improvement in the technical setup of the exchange rate with a breakout and consolidation above daily trend resistance off the July high. Meanwhile, the gains achieved at the upper 1.06 levels ensure that strong support on the declines remains clear. According to analysts, signs of trend strength are developing upward for the euro on the intraday and daily oscillator indicators, which would enhance support for the euro during minor declines.
Overall, the euro's recent strength will be tested this week by some euro zone data releases and a speech by European Central Bank President Christine Lagarde. First up will be German factory orders, which are expected to contract by 1.1% m/m in September as the sector continues to struggle.
Overall, sentiment towards the German economy is already poor and well understood in the currency markets, which means that any upside surprise is likely to have a more significant impact on the euro. Therefore, we look for gains if the data exceeds expectations. Watch for the release of the final Eurozone PMI for October, where any deviation from the initial release could trigger a reaction in the currency (composite figure expected at 46.5, services at 47.8). Again, any upgrade is likely to have the most significant impact on the market.
Today, Tuesday at 07:00 GMT, German industrial production for September is expected to reach 0%. The interaction function will be like the previous day's releases. On Wednesday, we will get a chance to see how resilient Eurozone consumers are in the face of higher interest rates, with retail sales due at 10:00 GMT. A reading of -3.1% is expected.
Later, ECB President Lagarde will speak on Thursday at 17:30 GMT, and the Euro will react to any new comments she may have on the economy and interest rate expectations. Therefore, we suspect they may deviate from the message that interest rates will be raised again if the data allow. Moreover, it must certainly acknowledge the progress that has been made on inflation and the continuing signs that the economy is struggling. If so, the euro may come under pressure.
EUR/USD Today Expectations and Analysis
According to the performance on the daily chart below, the price of the EUR/USD is in the stage of breaking the general downward trend, and stability above the 1.0800 resistance will be important for more bulls’ control over the trend. Moreover, the gains of the upward rebound may also clash with the return of investors to buy the US dollar as a safe haven. Especially, since global geopolitical tensions continue and expand, and the US Federal Reserve is still ahead compared to the European Central Bank in the goal of tightening monetary policy. On the other hand, over the same period, bullish hopes for the EUR/USD pair may evaporate if it moves towards the 1.0620 support level again.
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