Euro pierces 1.0600 to print four-day highs, Dollar remains weak.

The Euro regains the smile against the US Dollar.
European stocks kick off the week with decent gains.
Germany’s advanced inflation figures drop more than expected.

The Euro (EUR) leaves behind the initial pessimism against the US Dollar (USD), encouraging EUR/USD to climb to multi-day highs and trespass the key barrier at 1.0600 the figure at the beginning of the week. The better tone in the European currency comes in response to unexpected auspicious results from advanced GDP figures in Germany for the July-September period, while the broad-based risk-on sentiment also underpins the upside momentum in spot.

In the interim, the Greenback comes under some downside pressure and relaxes to the 106.20-106.15 band when gauged by the USD Index (DXY). The loss of momentum of the index comes in contrast to a languid climb in US yields across diverse timeframes.

Within the realm of monetary policy, a growing consensus has materialized amongst market participants that the Federal Reserve (Fed) will preserve its present stance of retaining interest rates unchanged at the upcoming meeting on November 1. The potential remains, however, for a potential shift in rates in December, a view that seems well reinforced by the resilience of the US economy and still elevated inflation levels.

Regarding the European Central Bank (ECB), no surprises arose at its event on October 26 following a unanimous decision to keep its interest rates unchanged. President Christine Lagarde reiterated once more that work remains to be done to bring inflation back to target, while it is anticipated that inflation will remain too elevated for too long. Adding a bearish undertone to the meeting, Lagarde acknowledged that risks to the economic outlook appear skewed to the downside.

From the speculative community’s viewpoint, net longs in the single currency increased to four-week highs in the week ended on October 24, according to the CFTC report. The period coincides with some consolidation in the pair against the backdrop of persistent resilience of the US economy and rising cautiousness prior to the ECB event.

Busy day in the euro calendar, as Germany’s advanced figures for the Q3 GDP Growth Rate showed the economy is expected to contract 0.1% QoQ and 0.3% YoY, while preliminary Inflation Rate for the month of October saw the CPI rise at an annualized 3.8%. In the broader Eurozone, final Consumer Confidence came in at -17.9, Economic Sentiment receded to 93.3 and Industrial Sentiment worsened to -9.3, all prints for the month of October.

Daily digest market movers: Euro opens the door to extra advances

The EUR attempts a decent comeback vs. the USD.
US and German yields attempt a tepid bounce at the beginning of the week.
There is still scope for the Fed to raise rates in December.
The ECB is seen extending its pause until H2 2024.
ECB’s Simkus sees a soft landing of the region’s economy.
ECB’s Kazimir suggests the ECB must keep its current restrictive stance for many quarters.
The Middle East conflict threatens to extend to other regions.
Investors continue to factor in further FX intervention around USD/JPY.
Retail Sales in Australia expanded more than expected in September.
Preliminary Inflation Rate in Spain came in at 3.5% YoY in October.

Technical Analysis: Euro now sets sails to the 1.0700 region

EUR/USD picks up some upside traction and shifts its focus to the 1.0600 hurdle on Monday.In case sellers push harder, EUR/USD could revisit the weekly low of 1.0495 (October 13), ahead of the lowest level in 2023 at 1.0448 (October 15), and the round number of 1.0400.

On the upside, the immediate short-term target for the pair emerges at the October high of 1.0694 (October 24), a level that appears reinforced by the proximity of the temporary 55-day Simple Moving Average (SMA) at 1.0673. Further up comes the weekly top of 1.0767 (September 12) before the key 200-day SMA at 1.0810, and another weekly high of 1.0945 (August 30), all ahead of the psychological level of 1.1000. Beyond this zone, the pair might face resistance at the August top at 1.1064 (August 10), prior to the weekly peak of 1.1149 (July 27) and the 2023 high at 1.1275 (July 18).The pair’s outlook is expected to remain negative while below the critical 200-day SMA.