Eurozone Data Mixed; ECB Considers Gradual Rate Cuts

The EUR/USD currency pair rose slightly as markets processed the latest economic data from the Eurozone. France's composite PMI dipped in October, showing continued economic weakness, while Germany's PMI improved slightly, hinting at stabilization in Europe’s largest economy.

Despite signs of a mild recovery, the European Central Bank (ECB) has already lowered rates three times this year and may continue to ease policy, especially if inflation remains low and business confidence weakens. ECB officials suggested gradual rate cuts might follow if inflation declines faster than anticipated.

Although Germany, the Eurozone's economic powerhouse, faces challenges from high energy costs and tough competition from China, recent data showed a slight economic rebound with increased industrial output and improved business sentiment. However, Eurozone business activity still contracted due to reduced domestic and international demand, despite efforts to control prices.

ECB President Christine Lagarde reiterated her goal of achieving a 2% inflation target sustainably by 2025. While she remains cautious about the timing of rate cuts, she highlighted that the so-called neutral interest rate might be slightly below current levels but above past rates, necessitating data-driven adjustments.

On the fiscal side, Piotr Serafin, the EU's Budget Commissioner-designate, emphasized a more streamlined budget for the 2028–2034 period, prioritizing defense, digital economy, and sustainability while linking investments to essential reforms. He advocated for a cohesive approach to EU spending, focusing on reducing regional inequalities and leveraging private investment to meet green and digital transition goals.

The U.S. dollar edged down slightly but stayed near three-month highs, buoyed by expectations for a slower pace of Federal Reserve rate cuts as economic indicators continue to show resilience. Strong recent data, including solid job figures, retail sales, and S&P Global’s Composite PMI rising to 54.3, has positioned the U.S. economy as stable, reducing the pressure for aggressive rate cuts by the Fed.

The dollar’s appeal is further boosted by the proximity to the presidential election, with market positioning favoring the possibility of a Republican win that could bring inflationary policies. The Fed's Beige Book reported little change in economic activity since September, while jobless claims data showed a decrease in new applications, though continuing claims reached a near three-year high, partially due to distortions from recent hurricanes and a Boeing strike.

Treasury yields also moderated, and single-family home sales surged in September as lower mortgage rates attracted buyers. This combination of factors has kept the dollar strong amid slower Fed cuts and robust economic performance. Market pricing suggests a 95% probability of a 25-basis-point cut in November, with Fed officials advocating a cautious approach.

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

Resistance : 1.0828, 1.0829, 1.0831

Support : 1.0824, 1.0823, 1.0821

30Min Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 1.0819 - 1.0824 is touched, but the support at 1.0824 cannot be broken, the TP may be set around 1.0829 and the SL around 1.0817, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0828 - 1.0833, TP may be set around 1.0837 and SL around 1.0822, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0828 - 1.0833 is touched, but the resistance at 1.0828 cannot be broken, the TP may be set around 1.0824 and the SL around 1.0835, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0819 - 1.0824, TP may be set around 1.0815 and SL around 1.0830, or up to the risk appetite.       

Pivot Points Oct 25, 2024 02:32AM GMT

Sources: Investing 1, Investing 2