Euro Declines Amid Strong Dollar

The euro experienced a slight decline, falling 0.07%, and was set for a 0.35% weekly drop. This was driven by a stronger dollar and political instability in Germany, where Chancellor Olaf Scholz's coalition government recently collapsed.

Concerns over U.S. policy also surfaced, with Greek Central Bank chief Yannis Stournaras warning that Donald Trump’s tariff policies could harm the European economy, impacting exchange rates and European Central Bank (ECB) policy. European Central Bank officials expressed concerns over global risks after Trump's election, cautioning that his policies might increase U.S. deficits and inflation.

Meanwhile, eurozone retail sales and business activity showed modest improvement, although companies remain cautious due to rising wage pressures and shrinking profit margins. Eurozone inflation increased more than expected in October, reaching 2.0%, prompting discussions on ECB rate cuts, especially as wage growth remains high and the jobless rate is at a low of 6.3%.

Economic growth in the eurozone accelerated slightly, with GDP rising by 0.4% in Q3, helped by unexpected resilience in Germany. However, growth remains below potential, and policymakers agree that the ECB's rate cuts are essential to support the economy amid ongoing global uncertainties.

The ECB is likely to cut rates in December, with financial markets expecting further reductions. However, there are divisions within the ECB regarding the pace of cuts due to ongoing inflationary pressures in services and uncertainties like the U.S. election outcome.

The dollar steadied on Friday after a volatile week, heading for a small gain as markets anticipated potential impacts of Donald Trump's return to the presidency on the U.S. economy and rate policies. Earlier in the week, the dollar had surged but then retreated as traders took profits following Trump’s election win.

On Thursday, the Federal Reserve cut rates by 25 basis points, following an earlier 50-point reduction in September. Fed Chair Jerome Powell offered no indication of pausing rate cuts soon, emphasizing that while the labor market had softened, inflation was progressing towards the Fed’s 2% target. September’s strong jobs report had initially raised doubts about further rate cuts, but a weaker October report, influenced by hurricanes and strikes, supported the Fed’s easing stance.

Powell stated that Trump's win would not impact Fed policy immediately but noted the central bank would eventually assess how new administration policies—such as tariffs, tax cuts, and immigration measures—affect inflation and employment. Traders raised the odds of a December rate cut, with some forecasting rate reductions through 2025.

U.S. mortgage rates rose, with 30-year fixed rates reaching a four-month high of 6.79%, amid fears of inflation under Trump’s proposed policies. Meanwhile, rising labor costs could complicate the Fed's goal of bringing inflation to 2%.

Data for Technical Analysis (1H) CFD EUR/USD

Resistance : 1.0786, 1.0788, 1.0793

Support : 1.0776, 1.0774, 1.0769

1H Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 1.0766 - 1.0776 is touched, but the support at 1.0776 cannot be broken, the TP may be set around 1.0786 and the SL around 1.0761, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0786 - 1.0796, TP may be set around 1.0814 and SL around 1.0771, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0786 - 1.0796 is touched, but the resistance at 1.0786 cannot be broken, the TP may be set around 1.0773 and the SL around 1.0801, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0766 - 1.0776, TP may be set around 1.0753 and SL around 1.0791, or up to the risk appetite.       

Pivot Points Nov 8, 2024 04:46AM GMT