The EUR/USD has been volatile this week. It lost ground in the United States on Tuesday. EUR/USD fell to new lows below 1.1300 and USD/JPY rose to its highest level since March 2017 above 115.00.
For the first time since February 2020, the EUR/GBP fell below 0.8400. The critical level to monitor on the day will be the 26 October low @ 0.8403. Which will serve as the major support level. with a break below that solidifies more downward momentum.
The pair’s recent rebound was halted by major trendline resistance and the 200-day moving average. Since then, selling has taken control. And as a result that momentum is expected to continue when BOE rate rise expectations are shattered this week.
The technical tailwind for the greenback remains in place. There isn’t much on the calendar this week to reverse the trend other than Fedspeak.
The EUR/USD has recovered much of its previous loss from 1.1265 to 1.1315. The break over 1.1300 is easing some of the agonies for buyers. However, the negative pressure remains mostly intact as we head into European trade today.
The bottom was 1.1265. However, there appears to be some respite around the 61.8 retracement level of the upward rise from March of last year to January of this year At 1.1290.
In the next sessions, it will be a significant mark to watch for any further negative extension, coupled with the 1.1300 level. A breach below that level will keep sellers in command as they look for a push towards 1.1200 next.
As for any buyer recovery, the 100-hour moving average is now at 1.1410. It is indicating that there is still a lot of work to be done to get any form of control at this point in time.
Treasury rates have also continued to rise. 10-year yields jumped to 1.64 percent overnight, giving some more support for USD/ JPY’s rise.
Equities, on the other hand, are doing their own thing. US indexes are once again approaching all-time highs. Futures are more tepid today. But that appears to be the pattern in Europe until things perk up later in US trade.
The UK and Eurozone inflation statistics will be important to watch in the next session. The former being particularly important because a higher reading will simply support BOE rate rise predictions heading into the December meeting.
Annual inflation in the United Kingdom is likely to rise again, creeping closer to 4%. It will put further pressure on the Bank of England to raise interest rates in December.
The pound may receive a minor shock from any positive numbers, although gains are more likely to be seen in EUR/GBP rather than GBP/USD. Especially given the dollar has been on a tear since last week.
September building production in the Eurozone
A lagging indicator, but one that is expected to confirm sluggishness as supply and capacity restrictions in Q4.
Eurozone final CPI numbers for October
The final measurements should confirm that inflation is at a 13-year high. While the ECB claims that all of this is temporary, it will be difficult to resist the statistics as they arise in the coming months.
A strong labor market report yesterday, combined with prior inflation figures, sets the BOE up to rehabilitate its reputation ahead of the December meeting.
For the time being, the market is gradually trusting that the pound will establish a bit of a foundation. As a result, maintaining gains against the euro as the single currency seems fragile with a lack of support on the way down for EUR/USD.