Technical Analysis

EUR/USD Starts The Week On A Quiet Note After Data Turbulence

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    The pair advanced slightly on Monday but remained trading within a narrow range as investors take the backseat ahead of a quiet week. With the most relevant data already behind, the U.S. bond yields and risk sentiment will dictate the pace of the markets in the following sessions.

    When writing, the EUR/USD pair is trading at daily highs at the 0.9770 zone, 0.55% above its opening price.

    Markets’ focus now shifts to the and meeting after September’s inflation readings of both economic blocks. In the eurozone, inflation rose to double digits, hitting 10%, while in the U.S., eased slightly to 8.2%, but the core reading jumped to a new 40-year high of 6.6%. In addition, last Friday, the 5-year Consumer Inflation Expectation from the University of Michigan survey jumped to 2.9% from 2.7%.

    Ahead of the central banks’ meetings, the WIRP tool shows that a 75 bps hike is practically fully priced in, but investors refrain from pricing a higher increase of 100 bps for the FOMC meeting on Nov. 2. On the other hand, a 75 bp hike by the ECB on Oct. 27 is nearly priced in, while the swaps market is pricing in 225-250 bps of tightening over the next 12 months, which would see the terminal rate peak between 3.0-3.25%.

    From a technical standpoint and according to the daily chart, the EUR/USD pair holds a short-term bearish perspective despite the fact the indicators are gaining some ground. The RSI trades with a positive slope below its midline, while the MACD printed a higher green bar, signaling bulls are gaining momentum.

    On the upside, the immediate resistance level is given by the 20-day SMA at 0.9775. A break above this latter could improve the short-term perspective for the euro and support the advance to the 0.9800 zone and then to the 0.9900 area. On the other hand, the next support levels are seen at the 0.9635 area, followed by 0.9600 and the cycle low of 0.9535.

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