Euro navigates around 1.0600 amidst vacillating risk trends, focus remains on US PPI, FOMC Minutes.

The Euro trades in an inconclusive note against the US Dollar.Stocks in Europe now trade in a mixed tone on Wednesday.EUR/USD so far struggles to gather fresh upside traction.The USD Index (DXY) trades close to monthly lows around 105.70.Final CPI in Germany rose 4.5% YoY, 0.3% MoM in September.US Producer Prices, FOMC Minutes take centre stage later in the session.The Euro (EUR) alternates gains with losses against the US Dollar (USD) on Wednesday, motivating EUR/USD to trade without a clear direction around the 1.0600 neighbourhood.

The Greenback remains under pressure below the 106.00 hurdle when measured by the USD Index (DXY) on the back of a better tone in risk markets, while investors continue to digest the recent dovish messages from Federal Reserve (Fed) officials.

In terms of monetary policy, investors presently expect the Fed to keep interest rates at their current levels for the rest of the year. Market participants are also speculating on the prospect of the European Central Bank (ECB) pausing policy changes, despite inflation levels above the bank’s objective and rising fears about the risk of a future recession or stagflation in the European area.

On the domestic calendar, final inflation figures in Germany saw the CPI rise at an annualized 4.5% in the year to September and 0.3% compared with the previous month.Data-wise in the US, the usual weekly Mortgage Applications tracked by MBA expanded 0.6% in the week to Ocotober 6, while September’s Producer Prices are due later followed by the publication of the FOMC Minutes of the September meeting, when the Fed kept its interest rates unchanged.

Daily digest market movers: Euro remains prudent prior to US docket

The EUR alternates ups and downs against the USD.US and German yields accelerate the downward bias on Wednesday.

Markets expect the Fed will keep interest rates on hold in the coming months.Investors suggest the ECB will extend the pause of its rate hike campaign.ECB’s Klaas Knot said the bank is ready to act in case disinflation stalls.ECB’s de Cos favoured a gradual and predictable quantitative tightening (QT).Geopolitical concerns remain on the rise around the Middle East.

Technical Analysis: Euro’s upside looks capped near 1.0630

EUR/USD appears poised to consolidate the recent breakthrough of the pivotal barrier at 1.0600.Continued upward momentum could potentially propel EUR/USD to revisit the September 20 high of 1.0736, followed by the significant 200-day Simple Moving Average (SMA) at 1.0823. If the pair manages to break above this level, there is potential for testing the August 30 peak at 1.0945 and approaching the psychological threshold of 1.1000. Further breakthroughs beyond the August 10 peak of 1.1064 may lead the pair to the July 27 top at 1.1149 and potentially reach the 2023 peak of 1.1275 from July 18.

Conversely, if selling pressure resumes, there is a possibility of retesting the 2023 low at 1.0448 from October 3 and potentially challenging the significant psychological level of 1.0400. Should this level be breached, it could pave the way for a retest of the weekly lows at 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022).

As long as the EUR/USD remains below the 200-day SMA, the potential for sustained downward pressure persists.

GERMAN ECONOMY FAQS

What is the effect of the German Economy on the Euro?

The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany’s economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany’s economy strengthens, it can bolster the Euro’s value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro’s strength and perception in global markets.

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