The EUR/USD exchange rate tumbled to 1.0789, marking its lowest level in nearly three months, as the US dollar surged in strength.
Market sentiment favours the dollar amid expectations that the US Federal Reserve will maintain a cautious approach to interest rate cuts, with a gradual and limited reduction anticipated.
Adding to the dollar’s momentum are growing prospects for Donald Trump’s re-election, which now appears more likely, contributing to political stability in the US.
At the same time, the Euro is under pressure following a significant interest rate cut by the European Central Bank (ECB). This move has set the stage for a downward trend in the EUR, leaving limited room for recovery.
Federal Reserve officials have advocated for a conservative approach to monetary easing, suggesting that while a 50-basis-point rate cut by the end of the year is plausible, more aggressive measures are unlikely.
The primary factors driving the US dollar’s ongoing strength are the combination of Federal Reserve caution, rising US government bond yields, and the potential for continuity in political leadership under a second Trump term.
Today, the focus will turn to key economic indicators. These include Markit’s October business activity reports for services and industry.
Market participants will be watching data on new home sales and the weekly unemployment benefits report, which are critical to the Federal Reserve’s assessment of the employment landscape.
Also Read: Market Outlook for October 24: Nifty and Bank Nifty Navigate Key Levels
Technical Analysis of EUR/USD
In the technical analysis for EUR/USD, the pair has completed a downward wave to 1.0760 and is currently rebounding toward 1.0880.
After reaching this level, a pullback to 1.0820 is expected, with the possibility of forming a consolidation range at the lower levels. A breakout from this range could see the pair rise to 1.0900, with an extension to 1.0990 as a potential target.
The MACD indicator, below zero but pointing upward, indicates the possibility of a corrective rally. The EUR/USD pair is developing its second growth impulse toward 1.0824 on the hourly chart.
Once this level is achieved, a corrective phase will likely target 1.0790. The Stochastic oscillator supports this short-term bullish correction within the broader bearish context.
GBP/USD Outlook
Meanwhile, GBP/USD has declined from 1.3433, with the intraday bias remaining on the downside. A more profound decline is expected, targeting the 61.8% retracement of the 1.2298 to 1.3433 range at 1.2732.
On the upside, any move above the minor resistance at 1.3070 would neutralize the intraday bias and lead to consolidation before another potential decline.
In the broader view, the mildly bearish divergence condition seen in the D MACD suggests that a medium-term top has likely formed at 1.3433.
Price actions from this level are seen as corrections to the overall uptrend from the 2022 low of 1.0351. A more profound decline would target the 38.2% retracement of the 1.0351 to 1.3433 rise, close to the 1.2298 structural support.
Japanese Yen Weakens Against Major Rivals
The Japanese Yen (JPY) experienced broad losses against its major counterparts earlier this week but staged a slight rebound on Thursday.
S&P Global will release preliminary Purchasing Managers’ Index (PMI) data for October, covering the manufacturing and services sectors for Germany, the Eurozone, the UK, and the US.
USD/JPY extended its upward trend, reaching its highest level since late July, climbing above 153.00 and gaining over 1% on Wednesday.
Early Thursday saw a correction in the pair, with USD/JPY falling below 152.50. Similarly, EUR/JPY and GBP/JPY recorded gains, with the pairs rising by 0.95% and 0.6%, respectively.
Bank of Japan (BoJ) Governor Kazuo Ueda remarked late Wednesday that achieving the 2% inflation target takes longer than expected.
Japan’s Finance Minister Katsunobu Kato reiterated the government’s stance that currency stability, in line with economic fundamentals, is desirable but refrained from commenting on potential foreign exchange market interventions.
Canadian Dollar and Gold Movement
As expected, the Bank of Canada (BoC) lowered the policy rate by 50 basis points to 3.75% during its October meeting. USD/CAD rose in response, touching its highest level since August, reaching 1.3860 before retreating to 1.3800.
In commodities, gold rallied during European trading on Wednesday, climbing above $2,760 and setting a new all-time high.
As the benchmark 10-year US Treasury bond yield surged above 4.25%, gold reversed course, ending the day down more than 1%. As of Thursday morning, gold had regained traction, trading above $2,730.
Also Read: Gold and Silver Rate Analysis for October 24, 2024: Market Trends and MCX Update
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