Euro News and Price Action Setups

• Lack of EU data and plenty of Fed speak could challenge euro upside
• EUR/USD shows resilience despite rising US yields and USD safe haven appeal
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

Lack of EU Data and Plenty Fed Speak Could Challenge Euro Upside

A distinct lack of EU-focused data this week has left the euro with few local drivers but despite this, EUR/USD shows resilience in the face of rising US yields and managed to extend recent progress against pound sterling.

A possible overhang for the euro was made evident this week after the Italian government approved the 2024 fiscal budget which includes tax cuts and increased spending with the intention of borrowing to make up any shortfall. To make matters worse, Italy’s budget deficit for the month of September was the worst on record. The indebted nation appears not to have learned the lessons of the 2011/12 European Sovereign Debt Crisis as yield spreads have widened in recent weeks with the BTP-Bund spread over 200 basis points now.

Keep an eye out this week for a plethora of Fed speak later this afternoon with Jerome Powell being the main event. Markets will be interested to know what Fed members think of the recent lift in US data from sticky CPI to the massive NFP surprise and better than expected retail sales. Next week we get the first look at US Q3 GDP which carries expectations of a 4.1% expansion over last quarter. The Fed’s estimation of current (Q4) GDP stands above 5%, highlighting a greater chance of a hike in the Fed funds rate in December.

EUR/USD Shows Resilience Despite Rising US Yields

The euro attempts to arrest the broader, longer-term decline in EUR/USD and has already achieved a higher low but has struggled to show signs of sustained upward momentum. The ECB meets next week and is largely expected to keep rates unchanged.

The pair is likely to remain sensitive to USD developments as it benefits from safe haven appeal during the regional tension in the Middle East. Fed speakers will also get their views and opinions across today and tomorrow ahead of the Saturday blackout period. 1.0520 remains the immediate level of support followed by the October swing low and then the long-term level of 1.0340. Resistance appears at 1.0635 followed by 1.0700.

EUR/USD Daily Chart

Source: TradingView, prepared by Richard Snow

EUR/GBP Heads Higher as UK Fundamentals Reveal Vulnerabilities

EUR/GBP appears to leave the prior range behind, as the latest rise has the pair testing a prior zone of support but now as resistance. The pair had been plagued by a tendency to revert back to the broad trading range but the recent ascendency has built on the prior bullish momentum.

Again, the move does not appear to be heavily influenced by EU drivers but is rather a function of worsening UK fundamental data. Earlier this week UK wages grew at a slower pace than expected which will be good news for the Bank of England (BoE). On Tuesday UK unemployment data is likely to reveal further easing in the labour market which could see further strides higher in the pair.

Resistance appears around 0.8725 after breaking above 0.8702 (monitor for a close above here on the daily chart). Also, it is important to note the pair trades above the 200 day simple moving average – often viewed as a trend filter suggesting the pair’s range bound tendencies may be a thing of the past. Support at 0.8635

EUR/GBP Daily Chart

Source: TradingView, prepared by Richard Snow

After analysing live trades and accounts, one golden thread could be seen amongst successful traders. Discover the main takeaways in the report below:

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX