The Euro (EUR) maintained a robust upward trajectory, marking its sixth consecutive day of gains on Monday, as it traded at two-week highs beyond 1.1620. This surge came despite a slight setback in the Eurozone’s manufacturing sector, as indicated by the November Purchasing Managers’ Index (PMI), which dropped to a five-month low of 49.6 from the anticipated 49.7, and down from 50.0 in October. However, the Euro’s strength is primarily attributed to a broad weakness in the US Dollar (USD), as investors brace for an interest rate cut by the US Federal Reserve (Fed) next week.
The US Dollar remained on the defensive amid market speculation surrounding the Fed’s upcoming decisions. Reports suggest that President Donald Trump may nominate Kevin Hassett, a known proponent of a dovish monetary policy, as the new chairman of the Fed. This change could align the central bank’s future policies more closely with Trump’s economic agenda, likely favoring lower interest rates.
In a related event, Fed Chairman Jerome Powell is set to participate in a panel discussion at Stanford University later on Monday. However, due to the Fed’s blackout period prior to the December meeting, no commentary on current monetary policy is expected from Powell. Investors will turn their attention to the November ISM Manufacturing PMI, which is predicted to slip slightly to 48.6 from 48.7 in October, with particular interest on employment figures in the report.
As for the Euro’s performance against other currencies today, it has shown strength, particularly against the British Pound. In percentage terms, the Euro gained 0.16% against the US Dollar and 0.28% against the British Pound, although inverse movements were noted in some instances, showcasing the dynamic nature of currency exchange rates.
While the Eurozone’s economic indicators highlight challenges in manufacturing, the prevailing USD weakness has instilled confidence among EUR/USD bulls. Technical analysis indicates that the Euro could breach the 1.1615 resistance area, which might signal a potential trend shift and lead to a test of higher resistance levels, namely the 1.1660 – 1.1670 range observed in late October and mid-November.
Monitoring immediate support levels, 1.1550 remains crucial, with the psychological barrier at 1.1500 potentially holding off sellers ahead of the lows seen earlier in November.
Looking ahead, a comprehensive economic calendar awaits, featuring the Eurozone’s Harmonized Index of Consumer Prices (HICP) on Tuesday, followed by Services PMIs from both the Eurozone and the US on Wednesday, alongside the ADP Employment Change report and the US Personal Consumption Expenditures (PCE) Prices Index on Friday.
In summary, despite manufacturing setbacks in the Eurozone, the Euro’s strength and positive market sentiment towards the Fed’s anticipated policy shift have contributed to its ongoing resilience against the backdrop of a weakening US Dollar.
