- The euro remains capped below 1.1600, close to long-term lows at 1.1525.
- Bitter market sentiment has weighed on the euro’s attempted recovery.
- EUR / USD extends decline to 1.1400 – Scotiabank.
The EURO It has tried to recover from the low of 1.1575 reached on Monday, before falling towards 1.1610 and returning to levels below 1.1600. On the bigger picture, the EUR / USD is still unable to return above 1.1600.
Risk aversion weighs on the euro
The risk-off mood seen on Monday, with major European stock indices in bearish numbers and mixed Wall Street, has weighed on attempts to rally the EUR / USD. Inflationary fears, which have returned to the spotlight, coupled with pessimistic macroeconomic data from China, have curbed appetite for risky currencies.
Chinese Q3 GDP disappointed today, showing growth of 4.9% and disappointing expectations for a 5.2% increase. Beyond that, industrial production increased 3.1% versus market expectations of a 4.5% reading. These figures have raised concerns about a slowdown in the Chinese economy, hit by high inflation and supply chain disruptions, which could generate shock waves around the world.
Furthermore, the global rise in inflation continues to add negative pressure on the euro, which has been one of the worst results of the G10 in recent weeks. Rising energy prices have pushed consumer inflation to 13-year highs in the euro zone and threaten to derail the post-pandemic recovery.
EUR / USD: Technical outlook points towards a substantial drop to 1.14 – Scotiabank
“The pair’s drift back to the 1.1575 / 85 area today leaves it vulnerable to further pressure at the 1.15 area. We believe that the broader technical indicators continue to indicate room for EUR / USD losses to extend to 1.14 in the short term (2-4 weeks), while medium-term indicators suggest losses in the 1.11 area. “
Technical levels
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