The Euro has eased to just above the 1.1500 level after facing resistance at 1.1530, as investors adopt a cautious stance and the US Dollar remains supported amid fading expectations of Federal Reserve rate cuts.
EUR/USD attempts to recover have been short-lived. At the time of writing, the pair has slipped below 1.1510, approaching session lows near 1.1500. This follows a nearly 1.3% decline over the past four trading days, driven by a stronger US Dollar after the Federal Reserve’s recent “hawkish cut.”
US Dollar Strength Persists Despite Weak Manufacturing Data
On Monday, the US Dollar continued its upward trajectory, shrugging off disappointing US manufacturing data. The October ISM Manufacturing PMI showed contraction in the sector for the eighth consecutive month, with a decline in new orders and low employment contributing to the weak reading.
Fed officials remain divided on the policy path. San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee expressed cautious positions, while Fed Governor Stephen Miran argued that monetary policy remains too restrictive.
Meanwhile, futures markets have scaled back expectations for a December rate cut, with probabilities dropping from above 90% last week to around 67%, keeping the US Dollar and Treasury yields steady near recent highs.
Eurozone Outlook and ECB Watch
Investors are also awaiting remarks from ECB President Christine Lagarde, scheduled later on Tuesday. However, the market does not expect any new insights on monetary policy.
Eurozone economic data has been mixed. The HCOB Manufacturing PMI confirmed preliminary estimates, showing that the sector has stabilized at 50.0 in October, slightly up from September’s 49.8.
EUR/USD Technical Analysis
EUR/USD is attempting to stabilize after finding support around 1.1500, which coincides with the US Dollar Index hovering near the 100.00 mark.
- Upside: The pair could face resistance at 1.1545, followed by the October 22–23 lows near 1.1580. Further bullish momentum may reach the October 30 high near 1.1635.
- Downside: Immediate support is at 1.1500. A break below this could open the way toward 1.1450, near the 261.8% Fibonacci retracement of the late October rally.
Technical indicators are mixed. The RSI remains below 50, indicating bearish pressure, while the MACD is approaching a potential bullish crossover, hinting at a limited recovery attempt.
Market Sentiment: Risk-On vs. Risk-Off
Markets continue to reflect a moderate risk-off sentiment, as investors seek safety amid uncertainty. Here’s a quick guide to understanding risk sentiment:
- Risk-On: Investors favor growth assets such as equities, commodities, and commodity-linked currencies (AUD, CAD, NZD). Cryptocurrencies often rise.
- Risk-Off: Investors prefer safe-haven assets such as USD, JPY, CHF, Gold, and major government bonds.
Currently, the market is leaning toward risk aversion, supporting the US Dollar while limiting the Euro’s upside.
Currency Performance Snapshot
| Currency | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | — | 0.10% | 0.55% | -0.48% | 0.10% | 0.61% | 0.75% | 0.04% |
| EUR | -0.10% | — | 0.46% | -0.60% | 0.00% | 0.50% | 0.65% | -0.06% |
| GBP | -0.55% | -0.46% | — | -1.04% | -0.45% | 0.05% | 0.19% | -0.51% |
| JPY | 0.48% | 0.60% | 1.04% | — | 0.61% | 1.11% | 1.25% | 0.54% |
| CAD | -0.10% | -0.00% | 0.45% | -0.61% | — | 0.50% | 0.64% | -0.06% |
| AUD | -0.61% | -0.50% | -0.05% | -1.11% | -0.50% | — | 0.13% | -0.56% |
| NZD | -0.75% | -0.65% | -0.19% | -1.25% | -0.64% | -0.13% | — | -0.71% |
| CHF | -0.04% | 0.06% | 0.51% | -0.54% | 0.06% | 0.56% | 0.71% | — |
Bottom line: EUR/USD remains under pressure, caught between a strong US Dollar and subdued risk appetite. While technical indicators suggest a limited bounce, the broader trend favors caution, with immediate focus on 1.1500 support and potential resistance at 1.1545–1.1580.
Investors will closely watch ECB President Lagarde’s speech and upcoming US ADP employment data for further direction.