EUR/USD Wavers Near 1.0700 as Rate Hike Uncertainty Persists

The EUR/USD pair exhibits a lack of decisive movement in Wednesday’s Asian trading session, fluctuating within a narrow range around the psychologically significant 1.0700 level.

Despite a considerable retreat in U.S. Treasury yields and a sustained surge in U.S. stock markets, the U.S. Dollar does not advance on its substantial recovery from late September lows. This dynamic seemingly provides a supportive backdrop for the EUR/USD currency pair. Nonetheless, the downside for the Dollar is somewhat buffered by lingering questions regarding the Federal Reserve’s inclination towards future interest rate hikes.

Market interpretations of last week’s communications from the U.S. central bank hint at a possible cessation of its tightening cycle, as financial conditions may already be restrictive enough to mitigate inflation pressures.

Moreover, the recent softer U.S. employment data reinforces the notion of a pause in rate adjustments by the Fed in December. However, hawkish comments from certain Fed officials, recognizing the robustness of the U.S. economy, leave room for speculation about potential rate increases, which could underpin the Dollar. Investors are thus likely to avoid significant bets ahead of Fed Chair Jerome Powell’s upcoming speech in the early North American session.

On the European front, unexpected declines in German Industrial Production for September may weigh on the Euro, placing a limit on any gains for the EUR/USD pair. Anticipations that the European Central Bank may halt its rate-hiking sequence further imply that the currency pair might face downward pressure.

The market’s focus now shifts to the final German CPI data and Eurozone Retail Sales figures, which, along with U.S. bond yield trends and overall risk sentiment, are expected to drive short-term trading dynamics for the pair.

Technical Analysis: Bearish Bias Intact for EUR/USD Amidst Stochastic Weakness

The EUR/USD pair’s descent towards the anticipated 1.0640 level suggests the likelihood of ongoing bearish momentum, with a possible test of the ascending support line of the bullish channel, now near 1.0605.

The prevailing bearish outlook is reinforced by a distinct decline in stochastic momentum, with the proviso that any breach above 1.0760 would invalidate the bearish thesis, potentially reinstating a corrective bullish trend.

Today’s expected price range is delineated by the 1.0610 support level and the 1.0750 resistance level, with the trend forecasted to continue its bearish trajectory.

EUR/USD Live Chart