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Euro extends the constructive stance beyond 1.0600 – Crypto News
- The Euro accelerates its gains against the US Dollar.
- Stocks in Europe extend the multi-day decline on Monday.
- EUR/USD’s upside surpasses once again the 1.0600 barrier.
- The USD Index (DXY) comes under pressure and disputes 106.00.
- Eurozone flash Consumer Confidence is due in the domestic docket.
- The Chicago Fed National Activity Index comes next in the US calendar.
The Euro (EUR) is extending its constructive price action against the US Dollar (USD), encouraging EUR/USD to once again break above the 1.0600 hurdle at the beginning of the week.
The Greenback, by contrast, extends the bearish move and challenges the 106.00 support when tracked by the USD Index (DXY) in a context of further improvement in the appetite for the risk complex and the resumption of the uptrend in US yields across different maturities.
In terms of monetary policy, market participants expect the Federal Reserve (Fed) to maintain its current stance of keeping interest rates unchanged at the November 1 meeting. This view was reinforced by comments from Fed Chair Jerome Powell at his appearance at the Economic Club of New York last Thursday.
At the same time, investors are contemplating the possibility of the European Central Bank (ECB) discontinuing certain policy measures. This comes despite inflation levels surpassing the bank’s target and growing concerns about the risk of a slowdown or stagflation in the Eurozone’s economy.
On another front, the speculative community increased their net longs in the EUR for the first time since mid-August despite unchanged expectations around a most-likely pause of the ECB’s tightening campaign that could extend until Q3 2024.
In the euro docket, the European Commission (EC) will publish its advanced gauge of the Consumer Confidence for the euro area for October.
In the US data space, the only release will be the Chicago Fed National Activity Index for September.
Daily digest market movers: Euro remains stuck within the monthly range
- The EUR picks up extra impulse against the USD on Monday.
- US and German yields look bid early in the European session.
- Investors see the Fed keeping its interest rate unchanged in November.
- Market expectations suggest that the ECB will also keep rates unchanged.
- ECB is likely to encounter a stalemate in its interest rate hiking cycle.
- Geopolitical concerns in the Middle East remain in the centre stage.
Technical Analysis: Euro still risks a drop to 1.0500 and below
The EUR/USD keeps the consolidative mood well in place below the 1.0600 region at the beginning of the week.
If the bullish trend continues, EUR/USD may test the October 12 high of 1.0639, before moving on to the September 20 top of 1.0736 and the critical 200-day Simple Moving Average (SMA) of 1.0816. A break above this level might indicate a push to the August 30 peak of 1.0945, ahead of the psychological threshold of 1.1000. Any more advances might reintroduce a challenge of the August 10 high of 1.1064 before reaching the July 27 top of 1.1149 and potentially the 2023 peak of 1.1275 seen on July 18.
If the selling tendency returns, there is an immediate support at the low of 1.0495 from October 13 prior to the 2023 low of 1.0448 seen on October 3, all before the round level of 1.0400. If this zone is violated, the weekly lows of 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022) may be retested.
It is crucial to recall that the risk of sustained negative pressure persists as long as the EUR/USD remains below the 200-day SMA.
(This story was corrected on October 23 at 08:20 GMT to say that the 1.0222 level was reached on November 21, 2022, not November 30, 2022.)
German economy FAQs
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.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the ‘Fiscal Compact’ following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond’s price, and it is therefore considered a more accurate reflection of return. A decline in the bund’s price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
