- Explore the latest EUR/USD outlook, key factors influencing the market, and the impact of Eurozone industrial production data on the currency
The EUR/USD surges at the start of the day by 0.25%. The pair broke above 1.1600 and is currently trading around 1.1639. The EUR/USD grasped its gain from the dovish comments by the Federal Reserve’s Jerome Powell on Tuesday. These comments encourage the market sentiment to alleviate their fear about global trade, at least for the time being.
Key Comments from Fed’s Powell Boost Market Sentiment:
- Powel signaled concern over a sharp slowdown in U.S. hiring.
A weaker U.S. labor market suggests the economy is cooling, increasing expectations for rate cuts. This typically weighs on the U.S.dollar, supporting EUR/USD gains as investors move away from the Greenback. - The Fed is likely to cut interest rates twice more this year.
Dovish monetary policy expectations reduce demand for the USD as yields fall. While the euro may strengthen relatively. This creates bullish momentum for EUR/USD. - Traders anticipate a 25-basis-point cut to the 3.75%-4.00% range, followed by another in December.
Clear market pricing of future rate cuts signals continued pressure on the dollar, as lower interest rates make U.S. assets less attractive. The euro benefits, pushing EUR/USD higher.
Key Factors to Consider When Trading EUR/USD:
- The U.S. government shutdown has delayed the release of key economic indicators, including the September jobs report. The consumer Price Index (CPI) update is now rescheduled for October 24, just days before the Federal Reserve’s meeting on October 28-29.
Impact on EUR/USD:
The data delay increases uncertainty around the Fed’s next policy move, which may limit short-term U.S dollar strength. Traders could adopt a cautious stance, leading to range-bound or slightly bullish momentum in EUR/USD until clearer inflation and labor data emerge. - French Prime Minister Sebastien Lecornu announced the suspension of the 2023 pension reform until after the 2027 presidential election to ease ongoing political unrest.
Impact on EUR/USD:
The move eased domestic tensions and boosted investor confidence in the Eurozone’s political stability, leading to a slight appreciation of the EUR against the USD. - Traders await remarks from Fed members Stephen Miran, Christopher Waller, and Jeff Schmid later in the day.
Potential Impact on EUR/USD:
Hawkish comments could strengthen the USD and limit EUR/USD gains, while dovish tones could support the EUR/USD pair.
Eurozone Industrial Production Data Release:
- Industrial Production (MoM): Decreased by 1.2% in August, compared to a 0.3% increase in July, but still better than the market expectation of a 1.6% decline.
- Industrial Production (YoY): Increased by 1.1% in August, slower than the 1.8% growth recorded in July.
The monthly decline suggests slowing industrial activity in the eurozone, which could put downward pressure on the euro as it reflects softer economic performance. However, since the drop was less than expected, it may limit losses for the euro, indicating that the industrial sector remains relatively stable. Overall, the data sends a mixed message, likely leading to range-bound trading for EUR/USD until stronger economic signals emerge. The EUR/USD instant reaction remains 0.22% higher at near 1.1630.
EUR/USD Technical Outlook :
From the technical perspective, the EUR/USD failed to break below the support level at 1.1543 for the second time. These attempts have created a double bottom on the 4-hour time frame. This pattern suggests a potential trend shift. Additionally, the RSI indicates a bullish momentum as it’s above the key level of 50.
In the bullish scenario, the bulls are now testing the neckline of the formed pattern at 1.1630. A clear 4-hour close above the descending channel will pave the way to reach 1.1652 and then 1.1675.
On the downside, if the pair fails to hold above 1.1600, this will pave the way to lower levels toward the double bottom line at 1.1543 and then 1.1504. Confirmation could come with a clear 4-hour close below 1.1600. Last Week’s Analysis.
Federal Reserve comments can affect the EUR/USD because they influence expectations about U.S. interest rates. Hawkish remarks can strengthen the dollar, putting downward pressure on EUR/USD. Dovish comments can weaken the dollar, supporting a rise in EUR/USD. Traders react quickly to these signals, adjusting positions based on potential rate changes. Overall, Fed guidance directly impacts market sentiment and currency flows.
The Federal Reserve (Fed) typically holds monetary policy meetings eight times a year.
The European Central Bank (ECB) also schedules eight meetings annually.
These meetings review economic conditions and decide on interest rates and other policies.
They can influence currency pairs like EUR/USD due to changes in interest rate expectations.
Market participants closely watch the statements and press conferences for guidance
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