- EUR/USD reverses Wednesday’s gains and returns to 1.1580.
- The greenback looks bid in the wake of the FOMC event.
- German Factory Orders, Services PMI next on tap.
The selling bias hits the single currency and forces EUR/USD to return to the sub-1.1600 area ahead the opening bell in Euroland on Thursday.
EUR/USD looks to USD, yields
Following a volatile session on Wednesday, EUR/USD managed to chart decent gains, although the absence of follow through motivate spot to slip back to the negative territory on Thursday.
The pair, in the meantime, stays under pressure on the back of the decent advance in the greenback, which motivates the US Dollar Index (DXY) to regain the 94.00 barrier and beyond amidst a mixed tone in US yields.
It is worth recalling that the greenback surrendered ground on Wednesday after the Federal Reserve announced it will start tapering its bond-purchase programme later in the month at a monthly $15B, matching the broad consensus. Later, in his press conference, Chief Powell gave an upbeat assessment of the economy although he emphasized that the start of the tapering process has no links to a rates lift-off.
Later in the domestic docket, German Factory Orders and the final October Services PMI are due. In the broader euro area, September’s Producer Prices and the Services PMI are also due.
Across the pond, the usual Initial Claims, Challenger Job Cuts and Balance of Trade figures are all scheduled for later in the NA session.
What to look for around USD
The index managed to regain the 94.00 barrier and now looks to keep business above it following the FOMC event. In the meantime, and while investors continue to digest the Fed meeting, a vigilant stance is expected to prevail in light of Friday’s Nonfarm Payrolls. In addition, the greenback should continue to closely track the performance of US yields and the progress of the current elevated inflation as well as views from Fed’s rate-setters regarding the probability that high prices could linger for longer, all along the performance of the economic recovery against the backdrop of unabated supply disruptions and the equally incessant raise in coronavirus cases.
Key events in the US this week: Balance of Trade, Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).
Eminent issues on the back boiler: Discussions around Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.
EUR/USD levels to watch
So far, spot is losing 0.24% at 1.1584 and faces the next up barrier at 1.1688 (55-day SMA) followed by 1.1692 (monthly high Oct.28) and finally 1.1755 (weekly high Sep.22). On the other hand, a break below 1.1535 (weekly low Oct.29) would target 1.1524 (2021 low Oct.12) en route to 1.1495 (monthly low Mar.9 2020).
