EUR – Dollar Trades Narrowly Amid US Government Reopening

The euro traded in a narrow range against the dollar on Wednesday as market participants assessed the impact of a flood of economic data releases following the reopening of the US government on the Federal Reserve's interest rate policy. The US House of Representatives will vote on Wednesday on a temporary funding bill to end the longest government shutdown in US history. The bill aims to restore interrupted food aid, pay the salaries of hundreds of thousands of federal employees, and restart the paralyzed air traffic control system. A large amount of economic data delayed due to the shutdown will be released after the government reopens, including the closely watched monthly jobs report. The White House said on Wednesday that the October jobs and inflation reports may never be released due to the shutdown.

The prospect of the US government potentially ending the longest shutdown in history has helped boost risk appetite; however, risk appetite may soon wane due to caution, as the release of a large amount of important economic data after reopening could exacerbate market volatility. Continued concerns about the US labor market have strengthened market expectations for a Fed rate cut in December. However, given the differing opinions among Federal Reserve policymakers regarding the need for further rate cuts, better-than-expected data could dampen the recent risk aversion.

Fed Chairman Powell stated last month that the likelihood of a rate cut at the December meeting remains uncertain, and policymakers are divided on whether to continue easing policy as inflation remains relatively high. Federal funds futures traders estimate a roughly 64% probability of a December rate cut. Atlanta Federal Reserve President Bostic announced on Wednesday that he will retire on February 28, 2026, when his term ends. He also stated that he prefers to keep interest rates unchanged until there is “clear evidence” that inflation is moving toward the 2% target.

Technical charts show that both the RSI and Stochastic Oscillator have rebounded, and the euro narrowly held above the psychological level of 1.15 last week, suggesting a possible short-term stabilization. However, the 25-day moving average may present some resistance, as the euro has failed to break above it clearly in the past two months and is currently at the 1.1590 level. The significant resistance is expected at the 1.18 and 1.1850 levels. The supporting levels will be seen at 1.15 and 1.1460, with the next level at 1.14. Key support lies at the 200-day moving average of 1.1360.

Forecast Range:
Resistance: 1.1590 - 1.1800 – 1.1850
Support: 1.1500* - 1.1460 - 1.1400* - 1.1360

News Summary

10/11 Eurozone November SENTIX Investor Confidence Index: -7.4

ECB Vice President De Guindos: Central bank interest rates are currently at an appropriate level unless the economic situation changes.

11/11 ECB Executive Board Member Erdsen: Inflation risks are balanced.

Bank of France: Fourth-quarter economic growth expected to be only slight, political uncertainty is a drag.

Germany November ZEW Economic Sentiment Index: -78.7

Germany November ZEW Economic Climate Index: +38.5

12/ 11. German wholesale prices rose 0.3% month-on-month and 1.1% year-on-year in October. The final German Consumer Price Index (CPI) for October rose 2.3% year-on-year.

The final German Harmonized Index of Consumer Prices (HICP) for October rose 0.3% month-on-month.

The final German HICP for October rose 2.3% year-on-year.

Focus:

Thursday: Eurozone September Industrial Production (18:00)

Friday: German October Wholesale Prices (15:00)
Eurozone Q3 Employment (Preliminary) (18:00)
Eurozone September Trade Balance (18:00)
Eurozone Q3 GDP (Second Estimate) (18:00)

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