EUR/USD continues suffering, and extends its losses. The main drivers for the big fall are the not-so-dovish rate statement in the US and more importantly, the deflation dread in the euro-zone. The ECB is now expected to act in order to combat falling prices and this weakens the euro. The action continues even though some European countries are on holiday. important events are due in the US at the wake of a new month.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- In the Asian session, EUR/USD continued sliding after losing the 1.36 line..1.3570 proved to be only a temporary pause.
- Current range: 1.35 to 1.3570.
- Below: 1.35, 1.3460, 1.3415, 1.3325 and 1.3240.
- Above: 1.3570, 1.3650, 1.3710, 1.3800, 1.3870, 1.3940 and 1.4036.
- The round number of 1.35 is the next support line.
- Note the uptrend support line which is coming into the frame. It currently awaits the pair just under the 1.35 line.
- 1.3570 is only minor resistance on the way to 1.3650.
- 13:00 US Markit Final Manufacturing PMI. Exp. 51.1 points.
- 13:10 US FOMC member James Bullard talks. He usually has a strong influence on currencies.
- 14:00 US ISM Manufacturing PMI. Exp. 55.3 points. See how to trade this event with USD/JPY.
* All times are GMT.
For more events and lines, see the Euro to dollar forecast.
- Deflation in the euro-zone: The flash CPI estimates were surprisingly low, with YoY CPI rising only 0.7%, very far from the ECB’s 2% target. A fall into deflation could trigger a “lost decade” that everybody fears. This can trigger a rate cut or a new LTRO from the ECB – measures that could significantly weaken the euro. The euro already began the downfall, and the inflation was the main reason among 4 reasons why EUR/USD is falling.
- Fed keeps QE tap open: The Federal Reserve wrapped up a policy meeting on Wednesday, the first meeting since Congress hammered out an agreement on the debt ceiling and reopened the government. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. More importantly, the Fed didn’t make changes to its plan about tapering and removed the phrase “tightening market conditions” from the statement, practically leaving a small chance for tapering in December. This helped the dollar across the board.
- Mixed US data: Most recent US data was underwhelming of late, with ADP showing a weak gain in private payrolls, and jobless claims remaining high, despite a data cleanup. However, one low tier figure, the Chicago PMI, jumped by 10 points and helped the US dollar. The damage from the government shutdown and the resulting loss of confidence has yet to fully unfold
- Weak German numbers point to slowdown: It’s been a week to forget for German releases. On Thursday, Retail Sales posted its third decline in four releases, and Consumer Climate and Import Prices both fell short of their estimates. Earlier this week, German Unemployment Change came in at 2 thousand in September, just above the estimate of 1 thousand. Although this is a decent reading, this is the indicator’s third consecutive increase, raising concerns that the German economy is slowing down. The jobless rate was unchanged at 6.9 percent. If the Eurozone is to remain out of recession, it can ill afford for Germany, the region’s number one economy, to slow down.