Euro Weaker on Geopolitics & US Inflationary Pressures

EUR/USD analysis

• Focus on China, Israel/Palestine, and economic data.
• EUR/USD could retest the yearly low of 1.0445.

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Basic background of the euro

The euro ended lower as the US dollar received support through its safe-haven appeal from rising geopolitical tensions in the Middle East. If this trend continues, the procyclical EUR/USD pair is likely to extend its downside.

The US CPI and Michigan Consumer Confidence Report both showed signs that persistent inflationary pressures will continue to offset the US dollar. Although there is little chance of a rate hike at the November meeting, there could be some knock-on effects down the road, especially if oil prices continue to rise.

The coming week will be relatively quiet, but some key data is expected to be released, including a US retail sales report and eurozone core inflation. Retail sales are expected to decline, potentially leading to a dovish resetting of Fed interest rate expectations. Eurocore inflation is also expected to fall, and with European Central Bank (ECB) officials still pondering over turning to easing measures too soon, the situation could change and weigh negatively on the euro. There is a possibility that The week concludes with a speech by Federal Reserve Chairman Jerome Powell that could provide some clues about the Fed’s thinking following a series of recent economic data.

China has been somewhat neglected in recent years, but slowing Chinese inflation has once again raised concerns about growth in a country that has traditionally had a good relationship with the euro. Regardless of the Chinese government’s stimulus efforts, weak economic data remains and does not bode well for euro bulls.

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Economic calendar (GMT+02:00)

Source: Refinitiv

technical analysis

EUR/USD daily chart

chart creator Warren BenketasI.G.

The daily chart of EUR/USD ended slightly higher. 1.0500 Friday’s psychological handle remains within the bearish zone of the Relative Strength Index (RSI). Going forward, it will be difficult to pick a directional bias as the market is highly sensitive to the Israeli-Palestinian war and an escalation/spreading escalation could move the pair in either direction. . Traders should exercise caution and use sound risk management techniques during this period.

Resistance level:

Support level:

IG Client Sentiment Data: Bearish

IGCS shows retail traders are currently neither. net long In EUR/USD, 71% Number of traders currently holding long positions (as of this writing).

Download our latest sentiment guide (below) to see how daily and weekly position changes affect EUR/USD sentiment and outlook.

Contact and follow Warrenon on Twitter:@Wenketas