TradingNEWS EUR/USD Trajectory: Fed Decisions and XAU/USD

EUR/USD Dynamics in Light of Upcoming Economic Indicators

Mixed Performance in Currency Markets

In recent trading sessions, the EUR/USD pairing has exhibited a resilience that defies broader market trends. Despite the US Dollar's strength against riskier assets, the Euro has shown an impressive comeback during the American session. Notably, this rebound has occurred even as the Dollar gains momentum, hinting at a complex interplay of market forces.

European Central Bank's Policy and the Euro's Fortitude

A key factor in the Euro's recent performance is the European Central Bank's (ECB) policy direction. The final reading of the German Consumer Price Index (CPI) revealed an annual rate of 3.8%, marking the lowest since August 2021. This slowdown in inflation, coupled with looming recession fears, suggests that the ECB's tightening cycle may have reached its culmination. Despite recent remarks from ECB officials like Lane, who caution against over-optimism on inflation figures, the market has largely priced in the end of the tightening cycle.

Furthermore, retail sales in the Eurozone for September have shown a marginal decline of 0.3%, slightly better than the anticipated -0.2%. Interestingly, August's figures were revised to show a lesser decline, enhancing the Euro's attractiveness to investors.

US Economic Landscape and Dollar's Future

The US economic calendar is packed with significant reports, including the upcoming Jobless Claims and insights from Fed Chair Jerome Powell. The market is particularly keen on the Fed's stance, expecting it to halt rate hikes. This perception is strengthened by Powell's recent remarks, which lacked a strong commitment to raising borrowing costs. The upcoming US Consumer Price Index will be crucial in confirming these expectations.

Technical Analysis of EUR/USD

Technically, EUR/USD shows a bullish trend above the 20-day Simple Moving Average (SMA), with support at the 55-day SMA. However, a dip below 1.0600 could spell trouble for this bullish outlook. The 4-hour chart suggests potential for further gains if the pair stays above 1.0710, targeting 1.0735 and possibly 1.0755.

Upcoming US Economic Reports' Influence

Traders are keenly awaiting the ISM services PMI survey and October employment figures from the US. If these indicators underperform, as the manufacturing PMI did, it could lead to a significant drawback for the Dollar, benefiting the Euro and gold prices.

Gold Price Analysis

Gold prices, reflecting in the XAU/USD pair, have shown an uptrend since October but face resistance near the $2,010/$2,015 mark. Two scenarios are foreseeable: a breakout above $2,015 could lead to a surge towards $2,085, while a drop below $1,980 might trigger further losses.

Market Anticipation of Powell's Speech

Investors are awaiting Fed Chairman Jerome Powell's speech at an IMF panel. This event, alongside the US Initial Jobless Claims data, is expected to provide fresh impetus to the currency markets. A stronger-than-expected job market or hawkish hints from Powell could reinforce the Dollar, applying downward pressure on the EUR/USD.

Technical Levels to Watch

For EUR/USD, key resistance lies at the Fibonacci 50% retracement level around 1.0700, followed by 1.0720 and 1.0750. Support levels are seen at 1.0670, 1.0640, and 1.0620. The pair's direction will largely hinge on upcoming economic data and Powell's commentary, offering traders critical insights into the near-term trajectory of these major currencies.
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