Euro bounces off lows and prints new two-day highs near 1.0600.

The Euro makes a U-turn against the US Dollar.

European stocks on their way to another close in the red on Friday.US PCE matches consensus in September.The Euro (EUR) accelerates its gains vs. the US Dollar (USD) at the end of the week, encouraging EUR/USD to approach once again to the key hurdle at 1.0600 the figure at the end of the week.In the meantime, the Greenback now comes under some tepid selling pressure and revisits the 106.40 zone when measured by the USD Index (DXY). The so-far daily downtick in the Dollar comes in tandem with the broad-based absence of direction in US yields across different maturities.

In the realm of monetary policy, a growing consensus has formed amongst market participants that the Federal Reserve (Fed) will preserve its present stance of retaining interest rates unchanged at the meeting on November 1. The door remains open, however, to a potential rate hike in December, a view that appears well propped up by the resilience of the US economy and still elevated inflation.

Back to the European Central Bank (ECB), there were no surprises at its event on Thursday following a unanimous hold. President Christine Lagarde reiterated once again that there is still job to be done regarding inflation, while it is expected that inflation will remain too high for too long. Adding a bearish tone to the meeting, Lagarde acknowledged that risks to the eocnomic outlook appear tilted to the downside.

On the domestic calendar, the ECB released its Survey of Professional Forecasters (SPF) and now sees inflation tracked by HICP at 2.7% in 2024 and 2.1% in 2025. Regarding the economic activity, the survey sees real GDP growth at 0.9% and 1.5% for the next year and 2025, respectively.

In the US, inflation figures tracked by the Personal Consumption Expenditures (PCE) Price Index rose 3.4% YoY in September and 3.7% YoY when it comes to the Core PCE. In addition, Personal Income rose 0.3% MoM during last month, Personal Spending gained 0.7% MoM and the final Michigan Consumer Sentiment Index improved to 63.8 for Ocotber.

Daily digest market movers: Euro shifts its attention to 1.0600 and above

The EUR gathers fresh steam vs. the USD on Friday.

US and German yields attempt a mild bounce.The Fed could still hike rates by 25 basis points in December.Investors continue to digest the ECB’s decision to leave borrowing costs unchanged.

Fears of an extension of the Middle East crisis appear to be on the rise.The possibility of FX intervention keeps gyrating around USD/JPY.

Consumer Confidence in France ticked higher to 84 in October.ECB’s SPF sees inflation in the region at 2.1% in 2025.US PCE softened in September, Consumer Sentiment improved in October.

Technical Analysis: Euro faces interim hurdle at the 55-day SMA

If the selling trend continues, immediate support might be found at the October 13 low of 1.0495, followed by the October 3 low of 1.0448 before reaching the round level of 1.0400. If this zone is breached, the pair may continue to decline towards the November 30, 2022 low of 1.0290 and the 2022 low of 1.0222 recorded on November 21.

If bulls reclaim control, EUR/USD will face first resistance at the October 24 high of 1.0694, which appears to be supported by the proximity of the temporary 55-day Simple Moving Average (SMA). The breakout of this zone exposes the high of 1.0767 on September 12, which precedes the key 200-day SMA at 1.0812. Once this level is surpassed, it may imply a further push for the August 30 height of 1.0945, prior hitting the psychological 1.1000 mark. If the upward trend continues, the August 10 record of 1.1064 may be challenged, followed by the July 27 high of 1.1149, and potentially even the July 18 peak of 1.1275.

As long as the EUR/USD remains below the 200-day SMA, the pair may remain under pressure.

EURO FAQS

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.

EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).