EUR/USD drifts lower on risk-off markets with Eurozone inflation on tap

EUR/USD has given away gains after another rejection at the 1.1600 area and trades at fresh weekly lows near 1.1570 at the time of writing, with all eyes on the final Eurozone Inflation figures. The risk-averse sentiment, as global equity markets are selling off, keeps the US Dollar (USD) buoyed on Wednesday.

US economic data, however, has not been particularly supportive for the Greenback. US Initial Jobless Claims grew beyond expectations in the week of October 18, and the US ADP Employment Change weekly report showed that businesses shed an average of 2,500 jobs per week in the four weeks ending on November 1. All in all, figures reflect a weakening labour market.

Bets of a Federal Reserve (Fed) interest rate cut in December have inched higher, but the Richmond Fed President, Thomas Barkin, affirmed on Tuesday that committee members might need more data to decide on rates.

In the Eurozone, on Wednesday, the final release of October’s Harmonized Index of Consumer Prices (HICP) is expected to confirm that inflation pressures remain at levels near the European Central Bank’s (ECB) 2% target. In the US, all eyes will be on the minutes of the October Fed meeting, which are due to be released at 19:00 GMT.

Daily digest market movers: The Euro remains vulnerable in risk-off markets

• The Euro keeps trading sideways, showing a lack of clear bias near weekly lows, as the sour market mood underpins the safe-haven US Dollar. The sell-off on global equity markets has triggered a rush for safety, which is keeping risk-sensitive assets like the EUR on the back foot.
• In the US, Initial Jobless Claims rose to 232,000 and Continuing Claims rose to 1,957 million, both for the week ending in October 18, and from 219,000 and 1,926 million respectively in the week of September 19 – this was the last week figures were released ahead of the US government shutdown.
• US ADP employment data revealed that businesses shed an average of 2,500 jobs per week in the four weeks ending on November 1. This is a better figure than the 11,250 average posted the previous week, but still reflects a weakening labour market and adds pressure on the Fed to cut interest rates further at upcoming meetings.
• On the positive side, US Factory Orders delayed data revealed a 1.4% increase in August, in line with market consensus, to offset the 1.3% decline seen in the previous month. The impact of this figure on the US Dollar, however, was minimal.
• On Wednesday, the Eurozone HICP is expected to confirm that inflation accelerated to 0.2% in October from 0.1% in September and that, year-on-year, consumer prices eased to 2.1% from 2.2% in September. The Core HICP is seen growing at a 0.3% pace in October and 2.4% yearly.
• During the US session, the minutes of the last Fed meeting are likely to provide further insight into the central bank’s monetary policy, although the highlight this week will be the release of September’s delayed Nonfarm Payrolls report, due on Thursday.

Technical Analysis: EUR/USD remains under pressure below 1.1600

There are no relevant changes in the EUR/USD technical picture. The pair remains trading sideways below 1.1600 with the bearish trend from 1.1650 in play. The mild recovery attempt from weekly lows near 1.1570 seems fragile, and technical indicators remain within negative territory.

The 4-hour Relative Strength Index (RSI) momentum indicator is below the 50 level, and the Moving Average Convergence Divergence (MACD) keeps posting red histogram bars. However, the MACD line is turning flat, suggesting a weaker bearish momentum.

Tuesday’s low near 1.1570 is still at a short distance and below there, the November 7, 10, and 11 lows in the 1.1535-1.1545 area, and the November 5 lows, near 1.1470, emerge as the next bearish targets. To the upside, Tuesday’s high, around 1.1610, is likely to challenge bulls ahead of the top of the bearish channel, which now lies around 1.1635. Further up, the October 28 and 29 highs, near 1.1670, would come into focus.

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