EUR/USD Sees Uptick Amid Dollar Vulnerability and Eurozone Economic Challenges

On Tuesday, the EUR/USD exhibited a 0.24% uptick, primarily attributed to the dollar's vulnerability, optimistic signals from ECB regarding potential interest rate hikes amidst supply shocks, and an unforeseen surge in Italy's industrial production.

The euro's persistent decline is fueled by a risk-off sentiment stemming from escalating conflicts in the Middle East. This geopolitical uncertainty has prompted investors to favor the dollar over the euro, intensifying the latter's depreciation. The situation is further exacerbated by China's disappointing Golden Week spending and a substantial contraction in German industrial production, both contributing to concerns about regional growth and exerting additional pressure on the euro.

The gloomy economic outlook in Europe remains a substantial burden on the local currency. Despite these challenges, ECB has expressed contentment with prevailing rates, aligning with earlier projections to maintain them. However, this stance has done little to alleviate the downward pressure on the euro.

Investor morale in the euro zone, as indicated by a survey, declined less than anticipated in early October, with Germany's economic weakness persisting but expectations showing a slight improvement. German industrial output continued its decline in August for the fourth consecutive month, signaling persistent pressure on the sector and fueling fears of a recession. Despite the better-than-it-looks scenario attributed to volatile components, there are expectations of further contraction in German industrial output in the coming months due to high interest rates and declining demand.

Germany's manufacturing sector, remains in a downturn, reflected by a Purchasing Managers' Index (PMI) in September, well below the growth threshold. Italian businesses' outlook darkened in the third quarter, with uncertainties about the political and economic landscape and higher energy prices contributing to a pessimistic view.

Despite geopolitical turmoil, the dollar index experienced a decline on Tuesday, influenced by a stock market rally and the Atlanta Fed's dovish stance on interest rates, contributing to the dollar's recent two-week low against a basket of currencies. This dip occurred even amid safe-haven demand triggered by Middle East tensions.

The complex financial landscape is further compounded by upcoming speeches from Federal Reserve officials, expected to provide insights about the upcoming US Consumer Price Index (CPI) report and signals on its interest rate outlook following the Non-Farm Payrolls (NFP) report. Consequently, the euro is anticipated to maintain a modest downward trend for a short period. The medium-term outlook is projected to remain influenced by the disparity in economic performance between the two regions and the economic stagnation observed in the Eurozone.

Data for Technical Analysis (5H) CFD EUR/USD

Resistance : 1.0615, 1.0618, 1.0624

Support : 1.0603, 1.0600, 1.0594  

5H Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 1.0593 - 1.0603 is touched, but the support at 1.0603 cannot be broken, the TP may be set around 1.0618 and the SL around 1.0588, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0615 - 1.0625, TP may be set around 1.0633 and SL around 1.0598, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0615 - 1.0625 is touched, but the resistance at 1.0615 cannot be broken, the TP may be set around 1.0603 and the SL around 1.0630, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0593 - 1.0603, TP may be set around 1.0588 and SL around 1.0620, or up to the risk appetite.       

Pivot Points Oct 11, 2023 02:54AM GMT

Sources: Investing 1, Investing 2