EUR/USD experienced a slight decline on Wednesday, hovering around 1.1670, having risen above 1.1600 the previous day. Investor sentiment appears cautious as the market awaits critical developments from the US Congress regarding government funding and upcoming economic data that could provide insights into the US economic landscape.
The Harmonized Index of Consumer Prices (HICP) from Germany, published earlier on Wednesday, confirmed preliminary estimates showing that consumer inflation held steady in October, aligning with the European Central Bank’s (ECB) target for price stability. The Wholesale Price Index experienced a modest increase from the previous month, reinforcing the ECB’s current monetary policy approach.
On the US front, figures from ADP indicated a net loss of 11,250 jobs in private employment for the four weeks ending on October 25. This data highlights the ongoing difficulties faced by the US labor market and adds further pressure on the Federal Reserve to consider additional reductions in interest rates at its upcoming December meeting. The combination of these factors has contributed to a weakening US Dollar.
Wednesday’s economic calendar includes appearances by ECB Vice President Luis De Guindos and board member Isabel Schnabel, likely to provide insights during the European session. Meanwhile, several Federal Reserve officials are expected to discuss the latest employment data and offer perspectives on future interest rate trajectories.
In today’s currency performance, the Euro emerged as the strongest against major currencies, particularly notable against the Japanese Yen. The US Dollar continued to exhibit a bearish trend, as market participants speculate that forthcoming official data may prompt the Federal Reserve to prioritize labor market conditions over inflation concerns, reinforcing the narrative for a potential interest rate cut in December.
German inflation figures confirmed the HICP’s 0.3% growth in October and a 2.3% increase over the previous year, a slight decrease from September’s 2.4%. The Consumer Price Index also rose to 0.3% in October from 0.2% the month prior, although the annual rate diminished to 2.3%. The Wholesale Price Index similarly rose by 0.3% in October, exceeding expectations, but its yearly growth rate retreated to 1.1%.
The recent ADP Employment Change report indicates that the average number of jobs lost weekly stands at 11,250, further substantiating the case for a dovish shift in Federal Reserve policy. Additionally, the German ZEW Survey’s latest findings reveal a decline in sentiment regarding the German economic outlook, with an insufficient rise in the Current Situation indicator compared to market expectations.
Technical analysis of EUR/USD suggests that the pair is approaching critical resistance levels, particularly near 1.1615. Indicators on the 4-hour chart hint at positive momentum, with the Relative Strength Index positioned around 60. However, there may be challenges for bulls aiming to surpass the 1.1600 mark. A break above the trendline resistance could shift focus to previous highs near 1.1670, while potential downside support is identified around 1.1530-1.1540.
As the market digests the information and awaiting further developments, investors remain vigilant about shifts in economic conditions, monetary policies, and their implications for currency valuations.
