Navigating the EUR/USD amidst Geopolitical and Economic Crosswinds
In the preliminary hours of Thursday’s Asian trading session, the EUR/USD tandem faces resistance, exhibiting a slight deceleration in its ascent. This perturbation is attributable to the mounting geopolitical tumult between Israel and Hamas, coupled with the mounting trajectory of US Treasury bond yields. Presently, the EUR/USD exchange hovers around 1.0538, marking a modest daily appreciation of 0.01%.
In tandem, the US Dollar Index (DXY), a benchmark that gauges the standing of the USD vis-à-vis a consortium of global currencies, evidences an uptick, registering at 106.55. Concurrently, the spotlight is on US Treasury yields: the 10-year benchmark notably peaks at 4.911%, a zenith not witnessed since 2007.
Given this backdrop, the amplified bond yields, juxtaposed with a prevailing market circumspection, have invigorated the US Dollar across the board. Amplifying this sentiment are voices from the Federal Reserve, who have unanimously underscored a proclivity to maintain prevailing interest rates. This stance has subsequently buoyed US bond yields, mirroring the robust economic dynamism of the country.
On the real estate front, the US housing sector portrayed a nuanced picture on Wednesday. Building permits were recorded at 1.475M in September, surpassing the forecasted 1.45M. Conversely, Housing Starts experienced a slight downturn, standing at 1.35M, marginally below the anticipated 1.38M.
Despite this, the data presented did not sway the FOMC from its operational trajectory. The Beige Book’s insights reveal an economic milieu exhibiting negligible fluctuations between September and early October.
From the Eurozone, September’s Harmonized Index of Consumer Prices (HICP) was pegged at 0.3%, as articulated by Eurostat’s Wednesday release. Furthermore, the European Central Bank’s (ECB) chief, Christine Lagarde, observed that the bedrock inflation remains formidable, with wages witnessing a historically elevated momentum.
Moving forward, the market’s gaze is affixed on imminent economic indicators: the US Jobless Claims and the Philly Fed index. An anticipated discourse by Federal Reserve Chair Powell also looms large. On the European front, the forthcoming unveiling of the Eurozone Current Account for August is eagerly awaited. These pronouncements are poised to sculpt the trajectory of the EUR/USD nexus.
Technical Forecast for EUR/USD
The EUR/USD duality recently endeavoured to navigate beyond the confinements of the bearish channel but retraced its steps, reinforcing the prevailing bearish sentiment. This perspective, further bolstered by the stochastic downturn, anticipates the duo’s descent to the 1.0510 mark, followed closely by the 1.0450 benchmark. It’s prudent to highlight that maintaining levels sub 1.0575 is pivotal for this anticipated downturn’s fruition.
For the day, market expectations delineate a trading ambit between the 1.0480 support and the 1.0630 resistance.
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