- The EUR starts November on the right foot after printing its third consecutive month of losses.
- Market sentiment is mixed, slightly boosting the shared currency against the dollar.
- The US ISM Manufacturing PMI figure was better than expected, but lagged behind the September reading.
The shared currency November begins on the right foot, advancing 0.24%, trading at 1.1583 at the time of writing this article. The pair EUR/USD fell for the third month in a row on the strength of the US dollar, rising US Treasury yields and expectations of a bond phasing announcement, which rose at the Federal Reserve meeting on September 22 . In addition, reinforcing the above, Fed Chairman Jerome Powell, in a virtual event organized by the Bank for International Settlements, said: “I think it is time to reduce”, but reiterated that it is not time to raise interest rates .
Market sentiment is mixed due to poor liquidity conditions as the euro zone is on a public holiday. At the time of writing, the US equity markets fluctuate between winners and losers, with the Dow Jones Industrial at the top, hitting 36,000 for the first time. Meanwhile, the dollar is slipping on the session, as shown by the US dollar index, which measures the dollar’s performance against a basket of six rivals, down 0.05%, clinging to 94.08.
On the macroeconomic front, the eurozone economic agenda presented German retail sales for September on an annual basis contracting 0.9% compared to 1.8% expected by analysts, according to data released by Destatis on Monday. The single currency barely blinked at the announcement of the report.
The US ISM Manufacturing PMI figure was better than expected, but lagged behind the September reading.
On the other hand, on the other side of the pond, the Institute for Supply Management (ISM) revealed the Manufacturing PMI for October, which rose to 60.8 more than the expected 60.6, but fell short compared to the September reading. Additionally, new orders fell to a 16-month low as factories continued to experience delays in shipping raw materials.
The most affected industry was the automobile industry. The industry witnessed the worst period for motor vehicle production since early 2009.
The EUR / USD reaction in the report was muted as the pair has been in the range between 1.1560 and 1.1575. In addition, the dynamics of the single currency would be in the hands of the USD, as the Federal Reserve will host its November monetary policy meeting, where market participants expect the bond reduction announcement to begin in mid-November.
On Tuesday, the economic docket will feature the IHS Markit PMI Manufacturing indices for most euro zone countries, and the ECB’s Elderson will make remarks.
EUR / USD Price Forecast: Technical Outlook
Daily chart
EUR / USD is biased to the downside, as evidenced by daily moving averages (DMAs) located above the spot price, with the 50-day being the closest to recent price action. At press time, the pair tests the Oct 28 low at 1.1581. Previous support now turned into resistance. Also, the momentum indicator like the Relative Strength Index (RSI) at 44 is below the center line of 50, which puts additional selling pressure on the pair.
In the case of a daily close above the latter, that would expose the figure of 1.1600, which in that case and following the trend, could be seen as an opportunity for the USD bulls to open new bets against the shared currency, in a renewed 2021 minimum attempt at 1.1524. However, caution is warranted as the November Fed meeting is just around the corner.
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