EUR/USD Climbs Above 1.0600: What's Driving the Euro's Momentum?

31 окт. 2023 г.

EUR/USD Climbs Above 1.0600: What's Driving the Euro's Momentum?

During the American trading session, the EUR/USD pair managed to break through the 1.0600 level, benefiting from a weaker US Dollar performance against major currencies. This upward move occurred just ahead of the highly anticipated FOMC meeting and significant jobs data. The Euro's momentum was further bolstered by positive economic data from the Eurozone. At its peak, the pair reached 1.0625, marking its highest level in the past six days. However, at this crucial juncture, the price faces another significant resistance area characterized by the confluence of the 62.8% Fibonacci retracement level and a dynamic resistance, which could potentially trigger a retracement today.

Turning our attention to the fundamental factors at play, it's noteworthy that the European Central Bank (ECB) is likely to receive Germany's data with a sense of relief. The economic contraction experienced during the third quarter was less severe than initially expected, with a mere 0.1% decline in economic activity quarter-on-quarter, a notably more optimistic outcome compared to the previously projected 0.3% contraction. What's more, this positive trend is reinforced by revisions to previous figures, effectively overturning the technical recession that had emerged in the last quarter of 2022 and the first quarter of 2023. In addition, the preliminary data for October indicates that annual inflation has decreased from 4.5% in September to 3.8%, comfortably falling below the anticipated rate of 4%.

For those closely following economic events, there is more to look forward to, particularly concerning German Retail Sales, which are scheduled to be released on Tuesday. On the same day, Eurostat will unveil the Eurozone Harmonized Index of Consumer Prices and GDP data. These data points lend support to the expectation that the ECB is likely to maintain its current stance in the near future.

On the other side of the Atlantic, the Federal Reserve (Fed) is about to commence its two-day meeting on Tuesday, and current expectations are for no changes to interest rates. However, the robust economic performance does allow for potential rate hikes if the FOMC deems them necessary. With a tight labor market and an annualized GDP growth rate in the third quarter exceeding 4%, the conditions are ripe for such monetary policy shifts.

This week is poised to be eventful with a slew of key data releases in the United States. Starting with the Employment Cost Index on Tuesday, investors will eagerly watch the ADP private employment report and the highly influential Nonfarm Payrolls data set to be published on Friday. These figures will wield considerable influence over the momentum of the US Dollar, which exhibited some weakness on Monday amid improved risk sentiment. As such, the dynamics of the EUR/USD pair in the coming days will likely hinge on the interplay of these economic forces.

31 окт. 2023 г.

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1 нояб. 2023 г.

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