Euro Rises Amid Inflation Slowdown; Dollar Faces Challenges

The euro experienced an increase against the US dollar, as Eurostat data confirmed a significant year-on-year slowdown in inflation within the euro zone. This slight uptick in the EUR/USD trading pair was influenced by a mix of economic indicators from both regions. While the Eurozone's current account results exceeded expectations and provided support to the euro, the US dollar faced challenges amid weaker-than-anticipated economic reports.

The Eurostat data revealed that more expensive services and food were the primary drivers of consumer price growth in the euro zone in October. Consumer inflation in the 20 euro zone countries decelerated to 2.9% year-on-year from 4.3% in September. Increases in the services sector played a significant role, contributing almost two percentage points, while higher costs for food, alcohol, and tobacco accounted for an additional 1.48 percentage points. Conversely, a substantial decline in energy prices deducted 1.45 points from the overall figure.

Euro zone industrial production declined in September, wiping out the previous month's rise, with consumer goods output dropping sharply, the steepest drop since June 2020.

A German court ruling impacting the federal budget could hinder growth by half a percentage point in 2024. Despite disruptions in budget deliberations, some decisions were made, including tax relief for small and medium-sized companies. Investor morale in Germany improved in November, entering positive territory for the first time since April, according to the ZEW economic research institute.

The European Central Bank (ECB) is navigating differing opinions on interest rates. While some members advocate for caution against early cuts, others express openness to easing. ECB President Christine Lagarde emphasized the need for a capital markets union, asserting that neither indebted governments nor banks can independently fund the bloc's productivity. Amidst this, a report by UBS CIO Year Ahead 2024 predicts a 75 basis point rate cut by the ECB in June, aligning with expectations of easing borrowing costs due to slow growth and subsiding inflation.

Looking ahead this week, the Eurozone is set to release purchasing manager indexes data for November, with limited expectations for a meaningful pickup in activity. The ECB's financial stability review and the minutes of its October policy meeting will also be published.

Meanwhile, on Monday, the US dollar remained close to its lowest point in over two months against major currencies, facing difficulties in gaining ground due to the prevailing belief that US interest rates have reached their peak. Despite slight growth in US homebuilding, higher mortgage rates dampened homebuilder confidence, yet a housing shortage supported the market.

Attention shifted to China's key rate decision, with expectations of unchanged lending benchmark rates.  This week, investors await insights from the Federal Reserve's meeting minutes for indications of the future trajectory of interest rates amid signs of cooling inflation. Additionally, the week includes key economic data such as existing home sales, jobless claims, and durable goods orders. Hence, there is an anticipation that the euro might experience a modest increase within the upper range in this period, although it is anticipated to remain under pressure, consistently weakening against the US dollar.

Data for Technical Analysis (30Min) CFD EUR/USD

Resistance : 1.0934, 1.0938, 1.0943

Support : 1.0924, 1.0920, 1.0915   

30 Min Outlook  

Source: Investing.com

Buy/Long 1 If the support at the price range 1.0919 - 1.0924 is touched, but the support at 1.0924 cannot be broken, the TP may be set around 1.0936 and the SL around 1.0917, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0934 - 1.0939, TP may be set around 1.0950 and SL around 1.0922, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0934 - 1.0939 is touched, but the resistance at 1.0934 cannot be broken, the TP may be set around 1.0922 and the SL around 1.0941, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0919 - 1.0924, TP may be set around 1.0908 and SL around 1.0936, or up to the risk appetite.       

Pivot Points Nov 20, 2023 04:30AM GMT

Sources: Investing 1, Investing 2