EUR/USD Strengthens as Fed Sees Rate Hikes Slowing Down ‘Soon’

The Euro closed higher against the U.S. Dollar Wednesday, soaring to a one-week high, as meeting minutes from the Federal Reserve showed that the central bank is looking to hand out smaller rate hikes in the coming months as inflation cools off.

At 20:30 GMT, the EUR/USD is trading 1.0400, up 0.0097 or +0.94%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $95.98, up $0.95 or +1.00%.

Minutes from the Fed’s November meeting signaled that the central bank is seeing progress in its fight against high inflation and is looking to slow the pace of rate hikes, meaning smaller ones through the end of this year and into 2023.

In economic news, the German yield curve inverted further and spreads between core and peripheral bond yields tightened after Purchasing Managers’ Index (PMI) data showed that overall demand continued to decline, suggesting a shorter monetary tightening path.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6386 will change the main trend to down. A move through .6798 will signal a resumption of the uptrend.

The minor range is .6798 to .6585. Its pivot at .6691 is the nearest support. This is followed by a retracement zone at .6631 to .6543.

On the upside, the nearest resistance is the longer-term 50% level at .6760.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at .6760 is likely to determine the direction of the EUR/USD on Thursday.

Bullish Scenario

A sustained move over .6760 will indicate the presence of buyers. The first upside target is the main top at .6798. Taking out this level could trigger an acceleration to the upside with the September 13 main top at .6916 the next likely upside target.

Bearish Scenario

A sustained move under .6760 will signal the presence of sellers. If this creates enough downside momentum then look for a pullback into the minor pivot at .6691. A failure to hold this level could trigger a break into the Fibonacci level at .6691.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Rangebound as Lagarde Comments Offset Hawkish Fed Tone

The Euro is edging higher on Friday, putting it in a positon to close slightly higher for the week. Despite the early strength, the single currency is being capped by hawkish remarks from Federal Reserve officials and stronger-than-expected retails sales that may have taken a Fed pivot off the table.

At 12:37 GMT, the EUR/USD is trading 1.0375, up 0.0011 or +0.10%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $95.66, up $0.26 or +0.27%.

Hawkish Fed Comments Cap Gains

One hawkish Fed official was St. Louis Fed President James Bullard, who said that even on dovish assumptions, the funds rate needs to rise to at least 5-5.25% to curb inflation, from 3.75-4% currently.

Additionally, speaking at an online event hosted by the Federal Reserve Bank of Minneapolis on Thursday, its President Neel Kashkari said rate hikes should continue until there is certainty that inflation has stopped climbing and that this print had not been reached yet.

Lagarde:  ECB May Have to Cool Growth to Control Inflation

ECB Chief Christine Lagarde said on Friday that the European Central Bank (ECB) may need to raise interest rates so much that they dampen growth as it fights sky-high inflation.

“Interest rates are, and will remain, the main tool for adjusting our policy stance,” she said. “Acknowledging that interest rates remain the most effective tool for shaping our policy stance, it is appropriate that the balance sheet is normalized in a measured and predictable way.”

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0480 will signal a resumption of the uptrend. A move through .9730 will change the main trend to down. This is highly unlikely, but there is room to the downside following a normal 50% to 61.8% correction.

The main range is 1.1185 to .9537. Its retracement zone at 1.0361 to 1.0556 is resistance. It stopped the rally on November 15.

The minor range is .9936 to 1.0480. Its 50% level at 1.0208 is support. Additional support comes in at 1.0076.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 1.0361 is likely to determine the direction of the EUR/USD on Friday.

Bullish Scenario

A sustained move over 1.0361 will indicate the presence of buyers. If this creates enough upside momentum then look for a possible surge into 1.0480.

Bearish Scenario

A sustained move under 1.0361 will signal the presence of sellers. If this move generates enough downside momentum then look for a sharp break into the daily pivot at 1.0208.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Trader Reaction to 1.0366 Sets Tone into Close

The Euro is trading lower, but up off its lows on Thursday as U.S. Treasury yields rose and investors bet on a relatively hawkish Federal Reserve.

The common currency had been rising in recent weeks as inflation data and Federal Reserve commentary implied that it could soon slow the pace of its interest rate hikes. Expectations of aggressive rate hikes by the European Central Bank (ECB) also give the Euro a boost.

At 19:00 GMT, the EUR/USD is trading 1.0365, down 0.0029 or -0.28%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $95.65, down $0.27 or -0.28%.

U.S. Treasury yields rose sharply following comments from key Fed speakers on inflation and the pace of further interest rate hikes from the central bank, St. Louis Federal Reserve President James Bullard said Thursday that interest rate hikes from the central bank have had “only limited effects” on observed inflation.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0480 will signal a resumption of the uptrend. A move through .9730 will change the main trend to down.

The minor trend is also up. A trade through .9936 will change the minor trend to down. This will shift momentum to the downside.

The main resistance zone is 1.0366 to 1.0560. It stopped the buying at 1.0480 on Tuesday.

The minor range is .9936 to 1.0480. Its pivot at 1.0208 is the nearest support. This is followed by a short-term 50% level at 1.0076.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 1.0366 is likely to determine the direction of the EUR/USD into the close on Thursday.

Bearish Scenario

A sustained move under 1.0366 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor pivot at 1.0208.

Bullish Scenario

A sustained move over 1.0366 will signal the presence of buyers. If this generates enough upside momentum then look for the rally to possible lead to a retest of 1.0480.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Jumps on Improving German Investor Morale

The Euro is firming following the release of mixed economic news. However, the results of the German ZEW Economic Sentiment, ZEW Economic Sentiment, Trade Balance and Flash Employment Change reports were not strong enough to change the economic outlook for the Euro Zone nor European Central Bank policy.

Despite the slight upside bias following the reports, the single currency remains just under its intraday high at 1.0418.

At 10:19 GMT, the EUR/USD is trading 1.0405, up 0.0080 or +0.77%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $95.30, down $0.27 or -0.285.

Mixed Economic Data

The Euro Zone swung to a large trade deficit in September from a small surplus a year earlier due to a surge in the costs of imported energy in the wake of Russia’s invasion of Ukraine, but the deficit was smaller than expected, data showed on Tuesday.

Euro Zone gross domestic product grew by 0.2% quarter-on-quarter in the July-September period for a 2.1% year-on-year increase, Eurostat confirmed on Tuesday, while employment in the single currency also rose.

Finally, German investor sentiment rose again in November on hopes that inflation rates will fall soon despite an overall negative view on the outlook for the German economy.

The ZEW economic research institute said on Tuesday its economic sentiment index rose in November, to -36.7, from -59.2 in October.

ECB Official Says Central Bank Would Continue to Lift Rates

In other news, ECB Vice President Luis de Guindos said on Monday the European Central Bank (ECB) would continue to raise interest rates, proceeding “with prudence”, to get inflation back to target, even if this process takes an “extended” period.

Short-Term Outlook

In the U.S., financial futures traders are pricing in an 89% chance of a 50 basis point rate hike by the Fed in December. The ECB is likely to raise rates by 75 basis points. This divergence is making the Euro a more attractive asset.

The current rally from .9730 began on November 3, one day before the release of the U.S. Non-Farm Payrolls report that showed an uptick in the U.S. Unemployment Rate. The common currency has been accelerating since last Thursday when the U.S. government released cooler-than-expected consumer inflation data that drove U.S. Treasury yields sharply lower along with the U.S. Dollar, fueling the current rally in the EUR/USD.

Later today at 13:30 GMT, traders will get the opportunity to react to the latest data on U.S. producer prices (PPI). Another report showing a cool down in U.S. inflation could launch a similar rally.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Advances to 3-Month High Despite EU Recession Warning

The Euro is testing its highest level since August 13 against the U.S. Dollar despite a European Union (EU) forecast calling for a recession to hit Europe. The price action indicates investors are still reacting to yesterday’s tepid U.S. consumer price index (CPI) report that drove down the odds of a supersized rate hike in December, while increasing the chances of a more modest 50 basis point rate hike.

At 11:48 GMT, the EUR/USD is trading 1.0289, up 0.0081 or +0.79%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $94.09, up $1.72 or +1.86%.

The EU also warned revised up its inflation forecast from July, which implies the European Central Bank (ECB) would have to continue to raise rates aggressively at a time when the Fed may be considering a more modest rate hike from December on.

Furthermore, Thursday’s U.S. consumer inflation report indicated that inflation may have peaked, while the EU sees Euro Zone inflation peaking later in the year.

European Commission’s Economic Forecast Recap

The Euro Zone and most EU countries will head to an economic recession in the last quarter of 2022, according to the European Commission’s autumn economic forecast.

“The economic situation has deteriorated markedly and we are heading into two quarters of contraction,” said EU economy commissioner Paolo Gentiloni at a press conference.

The EU’s executive committee also revised up its inflation forecast from July, predicting that prices would peak at year-end and remain high in 2023. Inflation will average 9.3% in the EU and 8.5% in the Euro Zone for 2022, Brussels said.

“The EU is among the most exposed advanced economies (to high prices), due to its geographical proximity to the war and heavy reliance on gas imports from Russia,” the European Commission said in a statement.

“The energy crisis is eroding households’ purchasing power and weighing on production.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0368 will reaffirm the uptrend. A move through .9730 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the market is inside the window of time for a potentially bearish closing price reversal top.

On the upside, the nearest resistance is a 50% level at 1.0361. Additional resistance is a 61.8% level at 1.0556.

On the downside, the nearest support is a pair of 50% levels at 1.0076 and .9952.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0208 is likely to determine the direction of the EUR/USD into the close on Friday.

Bullish Scenario

A sustained move over 1.0208 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the resistance cluster at 1.0361 – 1.0368.

Bearish Scenario

A sustained move under 1.0208 will signal the presence of sellers. This could trigger a break into the 50% level at 1.0076.

Side Notes

A close under 1.0208 will form a closing price reversal top. This won’t change the trend to down, but if confirmed, it could trigger the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Republican Win Could Weaken Greenback, Underpin Euro

The Euro is edging lower against the U.S. Dollar on Tuesday as traders booked profits ahead of today’s U.S. mid-term elections. Nonetheless, the single currency is still hovering around parity – the elusive level it regained the previous session – as investors bet an easing of COVID restrictions in China would help German exports.

At 12:39 GMT, the EUR/USD is trading .9998, down 0.0024 or -0.24%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $92.44, up $0.56 or +0.61%.

Bulls Wagering on Republican House, Senate Victories

Although the U.S. is holding its elections on Tuesday, traders may not know the actual outcomes until Thursday. At stake is the U.S. House of Representatives and the Senate.

The major news services are reporting that the Republicans are gaining momentum ahead of the opening of the polls.

Historical data shows that if the Republicans gain control of both the House and the Senate, Treasury instruments could rally and yields could fall, dragging down the U.S. Dollar. This would boost demand for the Euro. The data is based on the theory that Republicans would spend less and thus dampen the need for government bond sales that tend to drive up yields.

If the Democrats retain control then look for more spending and inflation. This would strengthen the dollar and weaken the Euro since it would likely lead to higher interest rates.

If the election ends in a stalemate then the Euro could trade flat-to-lower.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0094 will reaffirm the uptrend. A move through .9730 will change the main trend to down.

On the downside, the nearest support is a 50% level at .9952, followed by a short-term retracement zone at .9816 to .9750.

On the upside, the nearest resistance is a 50% level at 1.0076.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at .9952 is likely to determine the direction of the EUR/USD on Tuesday.

Bullish Scenario

A sustained move over .9952 will indicate the presence of buyers. Taking out yesterday’s high at 1.0034 will indicate the buying is getting stronger. This could trigger a surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will signal the presence of sellers. This could trigger the start of an acceleration to the downside with .9816 the next potential downside target.

For a look at all of today’s economic events, check out our economic calendar.

Euro Jumps on Improved Sentiment as Traders Bet China Will Ease COVID Restrictions

The Euro is surging against the U.S. Dollar late in the session on Monday as risk sentiment improved in Asia and Europe on persistent hopes China will ease COVID restrictions, dampening the U.S. Dollar’s appeal as a safe-haven asset.

Economic data also gave the single currency a lift at the start of the week. A survey showed on Monday that investor morale in the Euro Zone improved in November, the first time it rose in three months, reflecting hopes that recent warmer temperatures and falling energy prices will prevent gas rationing on the continent this winter.

At 18:15 GMT, the EUR/USD is trading 1.0021, up 0.0063 or +0.63%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $92.40, up $0.52 or +0.57%.

Traders Betting on Fed Rate Hike Slowdown

Investors were also assessing Friday’s U.S. jobs report which showed that firms added a more-than-expected 261,000 jobs in October and hourly wages continued to rise, evidence of a still-tight labor market.

However, the unemployment rate rose by more than expected, fueling hopes the Federal Reserve could start slowing the pace of future rate hikes as early as December and capping the U.S. Dollar.

Additionally, according to reports, Four Fed policymakers on Friday also indicated they would still consider a smaller interest rate hike at their next policy meeting.

Finally, Fed funds futures are indicating that traders are leaning toward a 67% chance of a 50-bais-point rate hike at the Fed’s December meeting.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0094 will reaffirm the uptrend. A move through .9730 will change the main trend to down.

The short-term range is .9537 to 1.0094. Its retracement zone at .9816 to .9750 is support.

The intermediate range is 1.0368 to .9537. The EUR/USD is currently trading on the strong side of its pivot at .9952, making it support.

The main range is 1.0615 to .9537. Its 50% level at 1.0076 is a potential upside target and possible resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .9952 is likely to determine the direction of the EUR/USD into the close on Monday.

Bullish Scenario

A sustained move over .9952 will indicate the presence of buyers. If this continues to generate enough upside momentum then look for a surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will signal the presence of sellers. This could trigger a sharp break into the short-term retracement zone at .9816 to .9750.

For a look at all of today’s economic events, check out our economic calendar.

Euro Rallies Amid Uptick in US Unemployment Rate; Gains Limited by Euro Zone Recession Fears

The Euro is trading higher and near the high of the session on Friday after the U.S. Dollar plunged following the release of a report that showed the world’s largest economy created more new jobs than expected last month, but suggested signs of slowing with the higher unemployment rate and lower wage inflation.

At 16:38 GMT, the EUR/USD is trading .9914, up 0.0163 or -1.67%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $91.51, up $1.54 or +1.71%.

Jobs Report Fuels Volatile Reaction

The highlight of the day has been the volatility. It is being fed by two-sided movement in U.S. Treasury yields. However, no one can question that the U.S. labor market is still strong. The uptick in the unemployment rate may keep a lid on the U.S. Dollar, but there is nothing in the report to suggest the Fed will not continue on its aggressive tightening path.

Data Suggests Euro Zone is Headed into Winter Recession

The downturn in the Euro Zone economy has deepened as high inflation and fears of an intensifying energy crisis hit demand, adding to evidence the bloc is heading for a winter recession, according to Reuters.

A closely-watched survey showed Euro Zone October business activity contracted at the fastest pace since late 2020. German industrial orders also slumped more than expected in September as foreign demand sank, putting Europe’s largest economy on course for recession, Reuters said.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0094 will signal a resumption of the uptrend. A move through .9705 will change the main trend to down.

On the downside, support is a retracement zone at .9816 to .9750. On the upside, potential resistance is a 50% level at .9952, followed by another 50% level at 1.0076.

Daily Swing Chart Technical Forecast

Trader reaction to .9952 is likely to determine the direction of the EUR/USD into the close on Friday.

Bullish Scenario

A sustained move over .9952 will indicate the presence of buyers. It this creates enough upside momentum then look for the rally to possibly extend into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will signal the presence of sellers. This could trigger a pullback into a minor pivot at .9835, followed by the support zone at .9816 to .9750.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Strong Non-Farm Payrolls, Lower Unemployment Rate Could Sink Aussie

The Australian Dollar is edging higher against the U.S. Dollar early Friday as traders await the release of key U.S. labor market data. The currency took a hit the previous session as markets wagered on higher U.S. interest rates for longer, putting the Aussie lower for the week.

Sellers came in heavy on Thursday as markets priced in a peak for U.S. rates up around 5.0-5.25% and well above what was expected at home. These expectations left the Australian 10-year yields a heavy 29 basis points below those on Treasuries and levels not seen since before the pandemic, making the U.S. Dollar the more attractive currency.

At 04:00 GMT, the AUD/USD is trading .6337, up 0.0048 or +0.76%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $62.30, down $0.61 or -0.97%.

In economic news, the Reserve Bank of Australia (RBA) highlighted its relatively dovish stance in a quarterly policy statement on Friday, emphasizing that it wanted to bring inflation down without tipping the economy into recession, according to Reuters.

RBA board members cited that reason for sticking to a smaller hike of 25 basis points this week, taking rates to 2.85%. The market, however, sees the RBA as being more aggressive in the future, implying a peak for rates around 4.0% in the middle of 2023.

All Eyes on US Non-Farm Payrolls Report

Traders are looking ahead to Friday’s October nonfarm payrolls report for further clues into the health of the U.S. economy.

The Labor Department releases its report for October at 12:30 GMT, which is expected to show a gain of 197,000 jobs. The Unemployment Rate is expected to have risen from 3.5% to 3.6% and Average Hourly Earnings are expected to have risen 0.3%, unchanged from September.

Traders should look for the AUD/USD to weaken if the headline number comes in higher than expectations, or if the unemployment rate comes in steady to lower.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6272 will signal a resumption of the downtrend. A move through .6492 will change the main trend to up.

The short-term range is .6170 to .6522. The AUD/USD is trading on the weak side of its pivot at .6346, making it resistance. The major resistance is the long-term Fibonacci level at .6466.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term pivot at .6346 is likely to determine the direction of the AUD/USD on Friday.

Bullish Scenario

A sustained move over .6346 will indicate the presence of buyers. The first upside target is a pivot at .6382, followed by the major resistance at .6466.

Bearish Scenario

A sustained move under .6346 will signal the presence of sellers. This could trigger a retest of yesterday’s low at .6272. Taking out this level could fuel an acceleration to the downside with the next target area .6211 to .6170.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Pressured after Fed Signals Terminal Rate Will Go Higher than Expected

The Euro is down sharply against the U.S. Dollar on Thursday as the greenback continued to firm, after the Federal Reserve signaled U.S. interest rates will likely peak at a higher rate than financial market traders had expected.

The Fed on Wednesday raised interest rates by 75 basis points to a target range of 3.75%-4.00%, the fourth such increase in a row as Chair Jerome Powell dampened hopes of a pivot to an easier monetary policy.

At 17:57 GMT, the EUR/USD is trading .9764, down 0.0052 or -0.53%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $90.05, down $0.70 or -0.77%.

“It is very premature to be thinking about pausing” on the effort to lift the federal funds target rate. Powell said in a news conference on Wednesday.

The outlook for the EUR/USD remains bearish with futures markets now showing traders have priced in U.S. rates peaking at 5.1% at the June meeting in 2023, which was up from about 4.9% initially expected in May.

US Economic Data Mixed Ahead of Friday’s Non-Farm Payrolls Report

On Thursday, U.S. Weekly Unemployment Insurance Claims totaled 217,000 for the week-ended Oct 29, down 1,000 from the previous period.

The September trade deficit widened to $73.3 billion. $1 billion more than expected and up from August’s $65.7 billion.

Unit labor costs increased 3.5% for the July-to-September period, below the 4% Dow Jones estimate. However, productivity rose at just a 0.3% annualized rate, below the 0.4% estimate – a reflection of upward price pressures that have kept inflation running around 40-year highs.

Outplacement firm Challenger, Gray & Christmas reported that announced layoffs for October jumped 13% to the highest monthly rate since February 2021.

The U.S. services industry grew at its slowest pace in nearly 2-1/2 years in October, but businesses continued to face higher prices for inputs, confirming that inflation was shifting to services from goods.

Traders are looking ahead to Friday’s October nonfarm payrolls report for further clues into the health of the U.S. economy. The Labor Department releases its report for October at 12:30 GMT, which is expected to show a gain of 205,000.

Main Trend is Up, But Momentum Has Shifted to Downside

The EUR/USD main trend is up, but momentum has been trending lower since the closing price reversal top was formed on 1.0094.

A trade through .9705 will change the main trend to down, while a move through 1.0094 will signal a resumption of the uptrend.

The minor trend is down. This is also signaling a shift in momentum.

The short-term range is .9537 to 1.0094. The EUR/USD is currently testing the lower end of its retracement zone at .9816 to .9750. This is the last potential support level before the .9705 main bottom.

Additional support levels under .9705 come in at .9632 and .9537.

On the upside, the nearest resistance is the short-term 50% level at .9816.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Fed Policy Change Unclear; Waiting for Powell to Break the Stalemate

The Euro is moving higher against the U.S. Dollar on Wednesday after the Federal Reserve concluded its two-day meeting Wednesday with another three-quarters of a point interest rate hike. This took rates to their highest level since January 2008.

The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

At 18:06 GMT, the EUR/USD is trading .9956, up 0.0082 or +0.83%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $91.24, up $0.05 or +0.06%.

Headline Rate Hike Meets Expectations; “Step-Down” in Policy Not Clear

According to CNBC, “Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move. Specifically, some Fed officials along with Wall Street economists and strategists in recent weeks had talked of a “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.

That language was not overt in the post-meeting statement from the rate-setting Federal Open Market Committee, though there was a tweak that could point to an adjustment in policy.

It looks as if traders are going to have to wait for Powell’s post-meeting briefing before they’ll know for sure whether the Fed is going to slow down the pace of rate cuts or continue on their hawkish tightening path.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0094 will reaffirm the uptrend. A trade through .9705 will change the main trend to down.

On the upside, the first resistance is a pivot at .9952, followed by another 50% level at 1.0076.

On the downside, the nearest support is a 50% level at .9868, followed by another pivot at .9815.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .9952 is likely to determine the direction of the EUR/USD into the close on Wednesday.

Bullish Scenario

A sustained move over .9952 will signal the presence of buyers. If this generate enough upside momentum then look for a surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will indicate the presence of sellers. This could trigger a sharp break into .9868, followed by a pivot at .9815.

Side Notes

The subdued price action after the release of the policy statement and rate hike suggests the Fed was too ambiguous about whether it would slowdown the speed of its future rate hikes. This puts the ball in Fed Chair Powell’s court to break the deadlock.

A hawkish Powell will send the EUR/USD lower. A dovish Powell could trigger an upside breakout.

For a look at all of today’s economic events, check out our economic calendar.

ECB Rate Hike Expectations, Weaker Dollar Lift Euro

The Euro is strengthening against the U.S. Dollar on Tuesday as pressure remained on the European Central Bank (ECB) to continue with rate hikes after data on Monday showed Euro Zone inflation came in hotter than expected at 10.7%, a new record. This likely prompted ECB President Lagarde to say the central bank must keep raising rates even if recession risks rise.

Meanwhile in the United States, the U.S. Dollar weakened as Treasury yields declined ahead of the Federal Reserve’s two-day meeting, which begins later today. Traders are also positioning ahead of today’s key jobs and manufacturing growth data.

At 10:32 GMT, the EUR/USD is trading .9935, up 0.0051 or +0.52%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $91.24, down $0.71 or -0.77%.

ECB’s Lagarde Issues Hawkish Warning despite Recession Fears

The ECB must keep raising interest rates to fight off inflation, even if the probability of a Euro Zone recession has increased, ECB President Christine Lagarde said in an interview published on Tuesday.

“Our mandate is price stability and we have to deliver on that using all the tools we have available,” Lagarde told Latvian news outlet Delfi, largely repeating last week’s policy message. “We are determined to do what is necessary to bring inflation back to our 2% target.”

JOLTS’s Job Openings Data, ISM October Manufacturing PMI on Tap

JOLTSs job openings data for September and ISM’s October manufacturing PMI are due to be released on Tuesday. Traders will be scanning the data for hints about the state of the U.S. economy and the potential easing of inflationary pressures.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through 1.0094 will signal a resumption of the uptrend, while a move through .9705 will change the main trend to down.

On the downside, support is a 50% level at .9868. On the upside, resistance is a pair of 50% levels at .9952 and 1.0076. The latter helped stop the rally at 1.0094 on October 27.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .9952 is likely to determine the direction of the EUR/USD into the close on Tuesday.

Bullish Scenario

A sustained move over .9952 will indicate the presence of buyers. If this creates enough upside momentum then look for a near-term surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will signal the presence of sellers. This could lead to a retest of the pivot at .9868. This is also a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Needs Hawkish ECB, Less-Hawkish Fed to Sustain Strong Upside Momentum

The Euro regained parity against the U.S. Dollar for the first time in a month on Wednesday as weakening economic data solidified views that the Federal Reserve will slow the pace of its interest rate increases.

Helping to fuel the strong recovery in the Euro was a sharp decline in the U.S. Dollar, which weakened in reaction to a drop in the benchmark 10-year U.S. Treasury yield. The single-currency was also boosted by position-squaring and short-covering ahead of Thursday widely expected 75-basis-point rate hike.

At 20:00 GMT, the EUR/USD is trading 1.0081, up 0.0113 or +1.13%. The Invesco CurrencyShares Euro Trust ETF (FXE) settled at $93.01, up $1.06 or +1.15%.

Traders Scanning US Housing Data for Signs of Recession

Investors absorbed U.S. New Home Sales Data for September, which fell 10.9% from the prior month to a seasonally adjusted annualized rate of 603,000 units, according to the Commerce Department. It was better than the expected 13.4% decline to 593,000 units according to consensus estimates from the Dow Jones.

In August, the figure had hit a five-month high, coming in above market expectations. However, data published last week showed existing home sales had declined in September. Talks about a housing recession have been spreading as the sector is highly sensitive to interest rates.

This chatter is leading to growing speculation that the Federal Reserve will slow its rate hikes to half a point in December after making a fourth-straight 75 basis-point interest rate increase next Wednesday.

Traders Expect ECB to Stick with Aggressive Rate Hike Plan

The European Central Bank meets on Thursday and appears in no mood to alter its plans for aggressive interest rate hike given red-hot inflation – even as the economic outlook darkens.

Economists polled by Reuters anticipate a 75 bps rate increase to 1.5%, a view reflected in market pricing. Furthermore, recession risks are unlikely to stand in the way for now, but traders will be looking for signs on when a pause might come.

Short-Term Outlook

Breaking down the rally in the EUR/USD, we notice that a textbook move is taking place. While traders were pricing in a series of 75-basis point rate hikes by the Fed, the Dollar was soaring and the Euro was getting pounded. Traders were even saying that the ECB cannot keep up with the Fed so the attractive currency will remain the U.S. Dollar.

That was before the number of fresh signs of a decelerating economy in the United States. Last week’s and this week’s U.S. housing data combined with a contraction in overall PMI’s led to speculation that the Fed may pullback in December on its plans to aggressively raise rates until inflation starts to weaken.

With the Fed likely to match the ECB with a 75-basis-point rate hike on November 2, the focus will shift to December’s rate hike expectations.

If the Fed hints that it will slow the size of its future rate hikes to 50 basis points in December and the ECB indicates it will continue to raise rates by 75 basis points at its December then the EUR/USD rally is likely to continue.

If the Fed hints at a 50 basis point rate hike in December and the ECB suggests it will dampen the size of its rate hike at that time then we could see profit-taking hit the EUR/USD.

Essentially, with 75 basis points for the ECB and Fed essentially priced in, the comments about the size of the December rate hike will determine if the rally continues or tapers off.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Makes Strong Recovery Amid Speculation Fed May Slow Pace of Rate Hikes

The Euro is trading higher against the U.S. Dollar late in the session on Friday after reversing earlier losses. The greenback came under pressure after a report said some Fed officials have signaled greater unease with big interest rate hikes to fight inflation, even as they line up another big rate hike for November.

At 18:00 GMT, the EUR/USD is trading .9840, up 0.0051 or +0.52%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $90.97, up $0.68 or +0.75%.

The Wall Street Journal reported that Fed officials are barreling toward another interest rate hike of 0.75 percentage points at their November meeting, while some policymakers have begun signaling their desire to slow down the pace of increases soon.

Fed officials are likely to debate then whether and how to signal plans to approve a smaller increase in December, the report said.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .9876 will change the main trend to up. A move through .9632 will reaffirm the downtrend.

The short-term range is .9537 to .9999. Its retracement zone at .9768 to .9714 is support.

The intermediate range is 1.0198 to .9537. Its 50% level at .9868 is the first upside target.

Additional resistance is a pair of longer-term 50% levels at .9952 and 1.0076.

Short-Term Outlook

Trader reaction to the 50% level at .9868 is likely to determine the direction of the EUR/USD into the close on Friday.

Bullish Scenario

A sustained move over .9868 will indicate the presence of buyer. This could drive the single currency into the main top at .9876.

Taking out .9876 will change the main trend to up. If this generates enough upside momentum then look for the buying to possibly extend into the 50% level at .9952.

Bearish Scenario

A sustained move under .9868 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the short-term 50% level at .9768.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Rebounds as Treasury Yields Shift Lower

The Euro is trading higher on Thursday after recovering from an early attempt to weaken it failed to attract enough sellers to continue the move.

The intraday reversal comes as a surprise since U.S. Treasury yields were edging higher with the benchmark U.S. 10-year Treasury yield testing a 14-year lower early today.

The move suggests investors may already be squaring positions ahead of a widely expected 75-basis point rate hike by the European Central Bank on October 27.

According to reports, a 75bp rate hike looks like a done deal but it may not be enough to stop the single currency from dropping further since the U.S. Federal Reserve is expected to match this move with its own 75bp rate hike on November 2.

At 12:01 GMT, the EUR/USD is trading .9814, up 0.0041 or +0.42%. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $90.18, up $0.79 or +0.87%.

US Economic Data Could Set Tone into Close

Starting at 14:30 GMT, the U.S. is scheduled to release a number of economic reports including the all-important Philly Fed Manufacturing Index. It is expected to come in at -5.0, an improvement from the previous month’s -9.9 reading.

Weekly Unemployment Claims and Existing Home Sales will also be closely watched. The former is expected to show 229K Americans filed for unemployment benefits last week, up slightly from 229K. Existing Home Sales are expected to have fallen to 4.69M units from 4.80M units.

Several Fed speakers are also on tap from 17:30 GMT to 18:05 GMT including Fed Governor Philip Jefferson, Fed Governor Cook and Fed Governor Michelle Bowman. They could pressure the EUR/USD if they come across as hawkish.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .9876 will change the main trend to up. A move through .9632 will signal a resumption of the downtrend.

The short-term range is .9537 to .9999. The EUR/USD found support earlier in the session inside its retracement zone at .9768 to .9714.

On the upside, the nearest resistance is a price cluster at .9868 to .9876. If the main trend changes to up then the pivot at .9952 will become the next target level.

Daily Swing Chart Technical Forecast

Trader reaction to a new minor pivot at .9815 is likely to determine the direction of the EUR/USD into the close on Thursday.

Bullish Scenario

A sustained move over .9816 will indicate the presence of buyers. If this move creates enough upside momentum, we could see a late session surge into the resistance cluster at .9868 to .9876.

Bearish Scenario

A sustained move under .9815 will signal the presence of sellers. If this generates enough downside momentum then look for a break into the short-term 50% level at .9768, followed by a retest of .9755.

The key support level is the Fibonacci price at .9714. Buyers could come in on the first test of this level, but if it fails then look for a possible acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Reverses Down after Slight Consumer Inflation Miss

The Euro is trading lower on Wednesday after annual Final consumer inflation came in slightly lower than expected at 9.9%. Traders were looking for a reading of 10.0%. Final Core CPI remained unchanged at 4.8%. Despite the dip in CPI, economist still predict the European Central Bank (ECB) will lift its benchmark interest rate next week.

The ECB meets on Thursday, Oct 27, and is widely expected to lift its key interest rates by 75 basis points. This would match its hike in September, after it started its tightening path with a 50 basis point hike in July.

At 11:43 GMT, the EUR/USD is trading .9770, down 0.0090 or -0.91%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $90.96, up $0.23 or +0.25%.

The Euro is also being pressured by a stronger U.S. Dollar, which is getting a lift from rising government debt yields. Treasury yields rose across the board on Wednesday as concerns over a recession spread among investors.

Concerns about a recession have been growing louder among investors as the Federal Reserve continues to follow a hawkish path lined with interest rate hikes. Speaking at an event on Tuesday, Minneapolis Fed President Neel Kashkari said he saw no reason not to push the central bank’s benchmark funds rate above 4.75% in order to tackle inflation.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .9999 will change the main trend to up. A move through .9632 will signal a resumption of the downtrend.

The short-term range is .9537 to .9999. The EUR/USD is currently testing its retracement zone at .9768 to .9714.

On the upside, a 50% resistance level at .9968 stopped the recent four day rally at .9876 on Tuesday.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at .9768 is likely to determine the direction of the EUR/USD on Wednesday.

Bearish Scenario

A sustained move under .9768 will indicate the presence of sellers. If this move gains any traction then look for the selling to continue into the short-term Fibonacci level at .9714. If this level fails then look for the selling to possibly extend into the next main bottom at .9632.

Bullish Scenario

A sustained move over .9768 will signal the presence of buyers. This could trigger an intraday short-covering rally into .9818. Sellers are likely to come in on the first test of this level, but if it fails, we could see a retest of the resistance cluster at .9868 to .9876.

Side Notes

Also today, EUR/USD traders will be looking for further insights into the state of the U.S. economy and the impact economic developments are having on consumers.

Today’s Fed speakers and housing starts and building permits data could give them the insight they are seeking.

For a look at all of today’s economic events, check out our economic calendar.

Is the EUR/USD Being Underpinned by Hawkish ECB Member Comments?

The Euro is edging higher early Monday as traders try to recover some of the previous session’s loss. Despite last week’s bearish U.S. consumer inflation report and rising expectations of another big rate hike by the Fed in November, the single-currency closed only slightly lower last week, suggesting there may be a little buying going on.

At 03:05 GMT, the EUR/USD is trading .9745, up 0.0018 or +0.18%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $89.86, down $0.32 or -0.35%.

Something May Be Propping Up the Euro

The price action suggests the EUR/USD is being propped up by the fact that a 75-basis-point rate hike in November has already been priced into the market. As of Friday’s close, the CME’s Fed Watch Tool was signaling a 97.2% chance of the huge rate hike.

But something else may also be underpinning the single-currency. I believe it’s the hawkish comments from ECB policymaker Bostjan Vasle. He said on Friday that the European Central Bank (ECB) should raise interest rates by 75 basis points at both of its upcoming meetings this year, then needs to discuss its balance sheet in 2023 as inflation is far too high.

Rates Need to be ‘Jacked Up’ According to ECB’s Vasle

It’s 0.75% deposit rate is still low enough to stimulate growth, however, and needs to be jacked up to levels where it starts putting the brake on the economy, Vasle, Slovenia’s central bank chief, told Reuters in an interview on the sidelines of the International Monetary Fund and World Bank annual meetings.

“Given both headline and core inflation dynamics, I think we will continue with interest rate increases at our next two meetings,” he said. “I think that our most recent pace for hikes is also appropriate at our next two meetings.”

When asked if he meant 75 basis points, Vasle, considered a hawk on the 25-member Governing Council, said “I think so.”

Short-Term Outlook

They may not be enough to change the main trend to up, but Vasle’s comments on Friday calling for a couple of super-sized 75-basis-point rate hikes by the ECB over the next few months may have been enough to spook a few of the weaker shorts out of the market. This nearly helped to turn the EUR/USD higher for the week.

The market essentially knows what the Fed is going to do at its November 1-2 meeting, but it isn’t sure how hawkish the ECB is willing to get as it tries to stop inflation.

Signs of a more aggressive ECB could give the EUR/USD a further boost this week. However, these gains could be limited if traders start to price in a 100 basis point rate hike by the Fed.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Reaction to .9714 Sets the Tone Ahead of Fed Minutes, US PPI Data

The Euro is inching lower early Wednesday after a higher close the previous session. The move followed four straight days of losses. Despite yesterday’s small gain, the single-currency remained within striking distance of the 20-year low touched on September 26.

In domestic news, the Euro Zone is expected to release data on Industrial Production at 09:00 GMT. The report is forecast to show a gain of 0.6%. This would be a strong improvement from the previously reported -2.3%.

At 02:46 GMT, the EUR/USD is trading .9686, down 0.0018 or -0.19%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $89.60, down $0.04 or -0.04%.

Euro traders are also bracing for the release of the minutes from the Federal Reserve’s September meeting at 18:00 GMT. While Fed Chairman Jerome Powell has acknowledged that aggressive interest rate increases could be painful, the central bank will continue to charge forward in its fight to lower inflation.

Investors are also looking forward to the September producer price index, a gauge of final-demand wholesale prices, due to be released by the Bureau of Labor Statistics on Wednesday at 12:30 GMT. Economists surveyed by Dow Jones are expecting headline PPI to increase 0.2%, after declining 0.1% in the previous month.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, since the formation of a closing price reversal bottom on September 28, momentum has been trending higher.

A trade through .9999 will change the main trend to up. A move through .9537 will negate the reversal bottom and signal a resumption of the downtrend.

The short-term range is .9537 to .9999. The EUR/USD is currently trading on the weak side of its retracement zone at .9714 to .9768, making it resistance.

The intermediate range is 1.0198 to .9537. Its 50% level at .9868 is additional resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term Fibonacci level at .9714 is likely to determine the direction of the EUR/USD on Wednesday.

Bearish Scenario

A sustained move under the short-term Fibonacci level at .9714 will indicate the presence of sellers. Taking out this week’s low at .9673 will indicate the selling pressure is getting stronger. If this creates enough downside momentum, we could see an acceleration into the nearest support at .9537.

Bullish Scenario

A sustained move over .9714 will signal the presence of buyers. Look for a quick short-covering rally in the short-term 50% level if this generates enough upside momentum. Sellers could come in on the first test of this level, but overcoming it could trigger an acceleration to the upside.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Outlook Remains Bearish Ahead of US CPI Data

The Euro is trading flat against the U.S. Dollar early Monday on well-below average volume due to a U.S. bank holiday.

Although today’s price action is likely to be subdued, the single-currency could resume its downtrend after Friday’s strong U.S. labor market report reinforced bets on aggressive Fed rate hikes as investors braced for data later this week expected to show stubbornly high inflation.

At 02:47 GMT, the EUR/USD is trading .9742, up 0.0001 or +0.01%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $89.90, down $0.53 or -0.59%.

U.S. Treasury yields are trading firm early Monday in limited action, making the U.S. Dollar a more attractive asset. The catalyst providing the support is Friday’s jobs report that showed U.S. unemployment unexpectedly fell last month. This news caused the odds of a super-sized 75-basis point rate hike at the Fed’s November 1-2 policy meeting to jump.

Meanwhile, U.S. inflation data due on Thursday is forecast to show headline inflation at a hot 8.1% year-on-year. Policymakers’ preferred core inflation is seen rising to 6.5%.

Friday’s jobs report indicated the U.S. economy is not cratering from the weight of a series of aggressive rate hikes by the Fed. However, rising energy prices and high inflation have put the Euro Zone economy on the brink of recession. Furthermore, the European Central Bank (ECB) is only expected to raise rates by 50 basis points.

The combination of all these events likely means lower EUR/USD prices over the near-term.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through .9999 will change the main trend to up. A move through .9537 will signal a resumption of the downtrend.

The minor range is .9537 to .9999. The EUR/USD is currently testing its retracement zone at .9768 to .9714.

The short-term range is 1.0198 to .9537. Its 50% level at .9868 is a potential upside target.

Daily Swing Chart Technical Forecast

Trader reaction to the minor Fibonacci level at .9714 is likely to determine the direction of the EUR/USD on Monday.

Bullish Scenario

A sustained move over .9714 will indicate the presence of buyers. The first upside target is the minor 50% level at .9768. Overtaking this level will indicate the buying is getting stronger. If this creates enough upside momentum then look for a near-term rally into the short-term 50% level at .9868.

Bearish Scenario

A sustained move under .9714 will signal the presence of sellers. This could trigger an acceleration to the downside with the next major target the September 28 main bottom at .9537.

For a look at all of today’s economic events, check out our economic calendar.

US Dollar Supported as Fed Officials Call for More Rate Hikes to Fight Inflation

The U.S. Dollar is trading flat early Wednesday after posting a choppy, two-sided trade the previous session despite hawkish commentary from several Federal Reserve policymakers.

The greenback is edging lower against the Euro and Japanese Yen, but is slightly higher against the British Pound. The subdued price action is the result of traders monitoring central bank activity and the impact on the growth of the global economy from their aggressive efforts to drive down inflation.

At 23:52 GMT, December U.S. Dollar Index futures are trading 114.095, unchanged. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $30.68, up $0.02 or +0.05%.

Daily December U.S. Dollar Index

Dollar Supported by Hawkish Fed Members

With the dollar index hovering just below a two-year high at 114.445, the trading activity suggests higher prices could continue especially with Federal Reserve officials ignoring the pain in the stock market while calling for the need of further rate hikes.

Minneapolis Federal Reserve Bank President Neel Kashkari was the latest hawk to voice his opinion when he said on a WSJ Live interview Tuesday that the Fed needs to keep tightening until it has evidence underlying inflation is heading down, then should pause and “let the tightening work its way through the economy” to see if it has done enough.

Early Monday, Susan Collins, the new president of the Federal Reserve Bank of Boston, endorsed Fed projections released last week that signaled its benchmark interest rate would rise to 4.6% by next year, up sharply from about 3.1% now.

Later, Cleveland Fed President Fed President Loretta Mester said, “When there’s a lot of uncertainty, it can be better for policymakers to actually act more aggressively, because aggressive action and pre-emptive action can prevent the worst-case outcomes from happening.”

Avoiding Recession Will Be a Challenge

The comments from the three Fed policymakers contributed to the ongoing debate about how badly the Fed’s rate hikes – the fastest in more than 40 years – will hurt the economy. By increasing its benchmark rate, the Fed is making mortgages, auto loans and credit cards more expensive for consumers and businesses.

Boston Fed President Collins acknowledges the rising worries about a recession, but she believes, “the goal of a more modest slowdown, while challenging, is achievable.”

Other Fed officials hope their rate hikes will achieve a “soft-landing” by slowing consumer and business spending enough to bring down inflation but not so much as to cause a recession. However, many economists are increasingly skeptical that such an outcome is likely. They think the U.S. could face a recession next year.

Fed Chairman Jerome Powell even acknowledged that “the chances of a soft landing are likely to diminish” as the Fed steadily raises borrowing costs.

“No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” Powell said.

Short-Term Outlook

There needs to be a slowdown in the economy to get inflation under control and the Fed sees rate hikes as the means to achieve this. This will be supportive for the U.S. Dollar until the Fed slows the size and the pace of the rate hikes, allowing other policymakers like the European Central Bank to catch up.

Even a U.S. recession is not likely to be enough to weaken the dollar because other economies are already headed there like the Euro Zone. Furthermore, a global recession will likely enhance the greenback’s appeal as a safe-haven asset.

For a look at all of today’s economic events, check out our economic calendar.