EUR/USD was been trending down since summer, as the USD turned bullish on prospects of the FED remaining hawkish for longer, while other major central banks such as the Europen Central Bank are increasingly sounding more dovish, with the Eurozone economy heading toward a recession. The GDP report for Q3 and the inflation numbers came below expectations, so the pressure to turn softer sooner is increasing.

The momentum in EUR/USD has been negative since inverting downward in July, with attempts to reverse the trend failing. The last effort was last week, but buyers failed to hit 1.07, and the price reversed early this week at the 50 SMA (yellow). Moving averages have therefore aided in offering resistance.

On the daily chart, the 20 SMA (gray) and 50 SMA (yellow) in particular continue to push the highs lower, indicating that selling pressure is strong. The rise in US Treasury rates, as well as good US statistics showing a healthy economy, have kept the USD in demand, while the Eurozone economy seems to be contracting. Today we had the CPI (consumer price index) inflation report from the Eurozone, showing a slowdown, which will strengthen the case for the ECB to turn dovish.

The inflation report was just released, with the core inflation moving lower to 4.2% from 4.5% in September, while the headline number retreated to 2.9% last month, heading toward the 2% target by the ECB.

Eurozone Consumer Price Index for October

• October Preliminary CPI YoY +2.9% vs 3.1% expected
• September CPIinflation was +4.3%
• Core CPI inflation YoY +4.2% vs +4.2% expected
• Prior core CPI inflation was +4.5%

Eurozone headline annual CPI inflation falls to its lowest level in over two years. The ECB is following this inflation report closely and the situation is going in their favour, so markets are not expecting more tightening by them.

Eurozone Q3 Prelim GDP Report

• Eurozone Q3 preliminary GDP -0.1% vs 0.0% expected
• Q2 Eurozone GDP was +0.1%

As most were expecting, the economy of the block shrunk in Q3, falling just short of expectations, as the German economy continues to struggle. France, Spain, and Belgium had a minor increase in economic activity, but other countries such as Portugal, Germany, Austria, etc contracted, which has affected the overall economy negatively.

EUR/USD Live Chart

• EUR/USD was unfazed by the reports
• The USD has been retreating since yesterday