Euro succumbs to the selling pressure ahead of the ECB gathering

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<li><strong>The Euro remains on the defensive against the US Dollar.</strong></li>
<li><strong>Stocks in Europe trade with marked losses on Thursday.</strong></li>
<li><strong>EUR/USD deflates to weekly lows near 1.0530.</strong></li>
<li><strong>The USD Index (DXY) extends the upside and approaches 107.00.</strong></li>
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<p>The Euro (EUR) is extending its vulnerability against the US Dollar (USD), resulting in <a href="https://www.fxstreet.com/currencies/eurusd" target="_blank" rel="noopener"><strong>EUR/USD</strong></a> shedding further ground to weekly lows around 1.0530 around the European midday on Thursday.</p>
<p>The Greenback is regaining further balance after extra gains on Wednesday, leading the <a href="https://www.fxstreet.com/currencies/us-dollar-index" target="_blank" rel="noopener"><strong>USD Index (DXY)</strong></a> to the proximity of the key hurdle at 107.00. The daily advance in the Dollar appears in contrast to a mixed performance in US yields across different maturities.</p>
<p>Regarding monetary policy, there is a growing consensus among market participants that the Federal Reserve (Fed) will maintain its current stance of keeping interest rates unchanged at the meeting on November 1. This view has been reinforced by remarks made by Fed Chair <a href="https://www.fxstreet.com/macroeconomics/central-banks/fed">Jerome Powell</a> in his recent speech at the Economic Club of New York on October 19.</p>
<p>Investors are contemplating the possibility of the <a href="https://www.fxstreet.com/news/european-central-bank-preview-ecb-expected-to-hold-interest-rates-for-first-time-in-current-tightening-cycle-202310260700">European Central Bank</a> (ECB) discontinuing its policy of tightening, even though inflation levels have exceeded the bank’s target and concerns are emerging regarding the risk of an economic slowdown or stagflation in the <a href="https://www.fxstreet.com/economic-calendar/country/c9822cb1-6cee-45f4-a9a2-89d136990308">Eurozone</a>. On this, the <a href="https://www.fxstreet.com/macroeconomics/central-banks/ecb">ECB</a> is widely anticipated to leave its interest <a href="https://www.fxstreet.com/rates-charts/rates">rates</a> unchanged at its meeting later in the session. This would be the first pause after ten consecutive interest-rate hikes.</p>
<p>Data-wise, in the US, the flash Q3 <a href="https://www.fxstreet.com/economic-calendar/united-states">GDP</a> Growth Rate will be at the centre of the debate, seconded by weekly Initial Jobless Claims, Pending Home Sales, Durable Goods Orders and preliminary Goods Trade Balance.</p>
<p><a href="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-10-26%20at%2009.57.55-638339038798115740.png" target="_blank" rel="noopener"><img decoding="async" src="https://editorial.fxstreet.com/miscelaneous/Screenshot%202023-10-26%20at%2009.57.55-638339038798115740.png" style="width: 750;height: 343;" /></a></p>
<h2>Daily digest market movers: Euro looks at the ECB for direction</h2>
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<li>The EUR’s decline picks up extra pace against the USD on Thursday.</li>
<li>US and German yields trade amidst a broad-based decline.</li>
<li>A 25 bps rate hike by the Fed remains on the table for December.</li>
<li>The ECB is seen entering a (protracted?) pause at its meeting on Thursday.</li>
<li>Geopolitical concerns in the Middle East remain steady.</li>
<li>The move above 150.00 in USD/JPY reignites intervention talk.</li>
<li>Investors’ attention will also be on Lagarde’s press conference.</li>
<li>US GDP figures are expected to show further resilience of the economy.</li>
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<h2>Technical Analysis: Euro risks extra weakness below 1.0500</h2>
<p>EUR/USD extends the bearish note to fresh weekly lows and shifts its attention to a potential visit to the 1.0500 neighbourhood.</p>
<p>If the selling trend continues, immediate support may be located near the October 13 low of 1.0495, followed by the 2023 low of 1.0448 seen on October 3 before hitting the round level of 1.0400. If this zone is crossed, the pair may continue to fall towards the lows of 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022).</p>
<p>If bulls retake control, EUR/USD will find initial resistance around the Wednesday’s top of 1.0694, which looks underpinned by the vicinity of the temporary 55-day Simple Moving Average (SMA). The breakout of this zone reveals the September 12 high of 1.0767, which precedes the significant 200-day SMA at 1.0813. Once this level is cleared, it might signal a further push towards the August 30 peaks of 1.0945, prior to the psychological milestone of 1.1000. If the rising trend continues, the August 10 peak of 1.1064 might be challenged, seconded by the July 27 high of 1.1149, and possibly even the 2023 top of 1.1275 seen on July 18.</p>
<p>As long as the EUR/USD continues below the 200-day SMA, the pair may face persistent negative pressure.</p>
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<h2>German economy FAQs</h2>
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<p>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.</p>
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<p>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.</p>
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<p>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.</p>
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<p>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.</p>
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<p>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).</p>
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<br /><a href="https://www.fxstreet.com/news/euro-drops-to-fresh-lows-near-10530-ahead-of-ecb-lagarde-202310260759">Source link </a></p><p>The post <a href="https://forextraderhub.com/euro-succumbs-to-the-selling-pressure-ahead-of-the-ecb-gathering.html">Euro succumbs to the selling pressure ahead of the ECB gathering</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>