After overnight firming, the EUR/USD currency pair is still largely stuck in a consolidative undertaking hovering just above 1.1650. This stability comes on the heels of surprising strength in October economic reports. Future announcements from the central banks will probably be the biggest driver of market direction. Then we got some upbeat data from the Eurozone, including the August PMIs. The duo has flown under the radar ever since the latest FOMC meeting minutes.
From a technical perspective, EUR/USD is above the slightly bearish looking 20 Simple Moving Average (SMA) on the daily chart. At the same time, 100 SMA is angling up beneath it. This is a positive configuration as far as the upward momentum behind the pair these days. Looking ahead, the new three-day meeting of central bankers may reveal new clues that affect the direction of EUR/USD.
The market is still digesting a lot of mixed headlines. Consequently, EUR/USD is stuck in an extremely narrow range that reflects the volatility risks around macroeconomic data and geopolitical news. The Euro – US Dollar currency pair still has important support at 1.1610, 1.1570 and 1.1540. Conversely, resistance is found at 1.1700, 1.1740, and 1.1785.
Pro traders have indicated that risk for EUR/USD is skewed to the downside. The technical indicators for the pair are presently consolidating below their midlines with slight bearish momentum.
Current tensions between EU and US over trade policy are weighing on market sentiment. A recent joint statement indicated that there may be tariffs applied on goods originating from the European Union, stating that authorities would “apply the higher of either the U.S. Most Favored Nation (MFN) tariff rate or a tariff rate of 15 percent, comprised of the MFN tariff and a reciprocal tariff.” These types of developments could introduce still more volatility in the EUR/USD exchange rate.
Hamburg Commercial Bank (HCOB) reported a noticeable uptick in business activity. This increase is the largest increase since a 5.0 percent annual increase in May 2021. This continues an increase in output that has been established in each of the last eight months. Despite this very bullish outlook, it appears that these numbers have so far failed to convert into any sizable moves for EUR/USD.
Still with the market waiting on new headlines from the annual Jackson Hole, WY central bankers’ meeting, traders are on the defensive. This mildly bearish technical set-up alongside increasing external pressures makes for a very volatile market. Any unexpected announcement could be the catalyst for major movement in the currency pair.
Even recent FOMC minutes, which got so much love from USD/JPY, EUR/USD responded with absolutely no reaction and resumed the sideways move. The muted response further underscores how currency markets are awash in uncertainty right now. Investors are balancing the improving economic fundamentals with the possibility of a new policy retort from the central banks.