EUR/USD Summary October + Most important Economic events
Thursday, October 10, 2024
14:30 USD Core CPI (MoM) (Sep) 0.2% 0.3%
14:30 USD CPI (YoY) (Sep) 2.3% 2.5%
14:30 USD CPI (MoM) (Sep) 0.1% 0.2%
14:30 USD Initial Jobless Claims 229K 225K
19:00 USD 30-Year Bond Auction 4.015%
In case there is no negative surprise in the US data I do believe that this is the most realistic scenario.
1. Technical Indicators (Charts Analysis)
4Hour Chart: The EUR/USD shows a recent downtrend with the 50 and 200period moving averages (MA) pointing downwards.
The Relative Strength Index (RSI) on this timeframe is in the oversold area but not deeply, which may suggest a possible shortterm bounce, but the downtrend could continue if the RSI doesn’t move back above 50.
1Day Chart: Here, EUR/USD also shows a downward trajectory. The RSI is just under 50, indicating weak momentum. The Commodity Channel Index (CCI) is in a negative territory, confirming bearish pressure. The downtrend could continue, given the position of the RSI and CCI.
Weekly Chart: The larger trend on the weekly chart shows some stabilization, with the 200week MA acting as a potential support level. However, RSI around 51 on this timeframe suggests neutral momentum, which could imply that any major movements are more likely influenced by economic fundamentals.
2. Economic Data Impact
Recent economic data from the U.S., such as Nonfarm Payrolls and ISM Services PMI, came out strong, which generally strengthens the USD. Meanwhile, the European inflation data, including the Harmonized Index of Consumer Prices (HICP), indicates slightly higherthanexpected inflation but hasn’t significantly impacted the EUR.
Given the strong U.S. economic indicators and the uncertainty in Europe, the USD is showing resilience, which adds pressure on the EUR/USD pair to stay bearish or rangebound unless European data strengthens significantly.
3. Interest Rate Parity Consideration
Using interest rate parity (IRP), which factors in the interest rate differential between the EUR and USD, we can anticipate some pressure on the EUR/USD. Currently:
The Eurozone’s interest rate is 4%, while the U.S. interest rate is 5%.
With a higher interest rate in the U.S., investors might prefer holding USD assets, which would lead to a lower EUR/USD exchange rate as the EUR depreciates relative to the USD over time.
Projection: What Could Be the Next Move?
1. ShortTerm: Based on the 4hour and daily technical indicators, there could be a shortterm bounce in EUR/USD if it reaches an oversold level, but the overall trend still appears bearish. The 50 and 200 MAs act as resistance zones.
2. Medium to LongTerm: With the interest rate differential favoring the USD and current U.S. economic strength, EUR/USD may continue to face downward pressure. The weekly support around the 200 MA could potentially provide some stability, but if this level breaks, further downside could be expected.
3. Fundamental Trigger: If there is any unexpected dovish statement from the Federal Reserve or stronger than expected Eurozone economic data, it could provide some support to the EUR. Otherwise, USD strength is likely to dominate, keeping EUR/USD bearish.
In summary, EUR/USD may see a shortterm bounce, but the overall bias remains bearish due to the interest rate differential, strong U.S. economic data, and technical indicators signaling weakness. Let me know if you'd like further clarification on any part of this analysis.
14:30 USD Core CPI (MoM) (Sep) 0.2% 0.3%
14:30 USD CPI (YoY) (Sep) 2.3% 2.5%
14:30 USD CPI (MoM) (Sep) 0.1% 0.2%
14:30 USD Initial Jobless Claims 229K 225K
19:00 USD 30-Year Bond Auction 4.015%
In case there is no negative surprise in the US data I do believe that this is the most realistic scenario.
1. Technical Indicators (Charts Analysis)
4Hour Chart: The EUR/USD shows a recent downtrend with the 50 and 200period moving averages (MA) pointing downwards.
The Relative Strength Index (RSI) on this timeframe is in the oversold area but not deeply, which may suggest a possible shortterm bounce, but the downtrend could continue if the RSI doesn’t move back above 50.
1Day Chart: Here, EUR/USD also shows a downward trajectory. The RSI is just under 50, indicating weak momentum. The Commodity Channel Index (CCI) is in a negative territory, confirming bearish pressure. The downtrend could continue, given the position of the RSI and CCI.
Weekly Chart: The larger trend on the weekly chart shows some stabilization, with the 200week MA acting as a potential support level. However, RSI around 51 on this timeframe suggests neutral momentum, which could imply that any major movements are more likely influenced by economic fundamentals.
2. Economic Data Impact
Recent economic data from the U.S., such as Nonfarm Payrolls and ISM Services PMI, came out strong, which generally strengthens the USD. Meanwhile, the European inflation data, including the Harmonized Index of Consumer Prices (HICP), indicates slightly higherthanexpected inflation but hasn’t significantly impacted the EUR.
Given the strong U.S. economic indicators and the uncertainty in Europe, the USD is showing resilience, which adds pressure on the EUR/USD pair to stay bearish or rangebound unless European data strengthens significantly.
3. Interest Rate Parity Consideration
Using interest rate parity (IRP), which factors in the interest rate differential between the EUR and USD, we can anticipate some pressure on the EUR/USD. Currently:
The Eurozone’s interest rate is 4%, while the U.S. interest rate is 5%.
With a higher interest rate in the U.S., investors might prefer holding USD assets, which would lead to a lower EUR/USD exchange rate as the EUR depreciates relative to the USD over time.
Projection: What Could Be the Next Move?
1. ShortTerm: Based on the 4hour and daily technical indicators, there could be a shortterm bounce in EUR/USD if it reaches an oversold level, but the overall trend still appears bearish. The 50 and 200 MAs act as resistance zones.
2. Medium to LongTerm: With the interest rate differential favoring the USD and current U.S. economic strength, EUR/USD may continue to face downward pressure. The weekly support around the 200 MA could potentially provide some stability, but if this level breaks, further downside could be expected.
3. Fundamental Trigger: If there is any unexpected dovish statement from the Federal Reserve or stronger than expected Eurozone economic data, it could provide some support to the EUR. Otherwise, USD strength is likely to dominate, keeping EUR/USD bearish.
In summary, EUR/USD may see a shortterm bounce, but the overall bias remains bearish due to the interest rate differential, strong U.S. economic data, and technical indicators signaling weakness. Let me know if you'd like further clarification on any part of this analysis.
Note
Since the US data is highly controversial I do suggest that the market remain indecisive, although we can see that retail positions are changing which means that more and more shorts position have been opened in the last few ours, meanwhile on a 4hour time frame we have reached a few support, not to mention the RSI signaling oversold with slight divergence to the upside.
But all these are just signs which is saying for us those are looking for a long position this prepare and keep your eyes open, I personally wouldn't be comfortable with a long position until tomorrow morning where we can see the true direction in the 1st hours in the European market session.
The most secure entry could be when the RSI-MA based line on my chart ( yellow line ) will be in the are of 30 or even lower like 23-25.
Note
As we anticipated 6-days ago the general trend is declining in EURUSD, meanwhile we are testing weekly support in the down-trend ECB-is expected to cut rates by 0,25bps on Thursday.
Dont be afraid to be in case of the data on the SAME day will show that FED needs continue to decreasing the rates too.
Stay tunned for further update.
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