- IFO indices in Germany were below the forecasted and previous values.
- The price of gold recovered from $ 1792 to $ 1810.
- The yield on 10-year bonds fell to 1.627%.
- Kos said supply chain problems and rising commodity prices are negatively affecting the pace of economic recovery.
On Monday, October 25, at the end of the day, the EUR/USD pair closed down. The euro fell in price against the dollar by 0.30%, to $ 1.1608. Trading in Asia began with the growth of the pair, but the euro came under pressure after the release of German statistics. Three German IFO indices (economic conditions index, current conditions index, business conditions index) were below the previous and forecasted values.
Then Pablo Hernandez de Cos, a member of the governing council of the European Central Bank and the head of the central bank of Spain, spoke. He said supply chain problems and rising commodity prices are negatively affecting the pace of economic recovery. Inflation is temporary and monetary policy will persist for a long time.
Throughout the month, representatives of the ECB have been talking about inflation, that its jump is temporary and there is no need to revise the monetary policy.
The euro exchange rate declined to 1.1591 and to date, the price is consolidating in the range of 1.1591-1.1617. Market participants expect reports on GDP for the 3rd quarter, as well as the ECB meeting and K. Lagarde's press conference (Thursday).
Scheduled statistics (GMT +3):
- At 13:00 in the UK are released data on retail sales from CBI for October.
- At 17:00 the US is to publish data: consumer confidence index for October, index of business activity in the industrial sector from the Federal Reserve Bank of Richmond for October, home sales in the primary market for September.
- At 23:30 will be released weekly stocks of crude oil according to the American Petroleum Institute (API).
Current situation:
On Tuesday trading in Asia, the major currencies are showing mixed performance. Aussies and New Zealanders are trading in positive territory, while the rest remain in negative territory.
The single currency is under pressure after yesterday's fall. In cross-pairs, the euro is bought only for the yen and franc. We can say that buyers have no support from allies.
On Tuesday, the economic calendar is empty for the euro. Despite the weakness of the euro, it is worth keeping an eye on the dynamics of the 10-year bond yields and the main EUR/GBP cross.
On Monday, the EUR/GBP pair returned to support at 0.8420. The cross has the ability to bounce sharply, so if it turns up again, it will push the EUR/USD pair up to the 1.1640 level. If before the meeting of the US Federal Reserve the dollar continues to strengthen, the euro will have to return to the level of 1.1500-1.1525.
Technical analysis:
At the time of writing, the euro is worth 1.1601. After the breakdown of the trend line (1.1632) and support at 1.1620, the price consolidates in the range of 1.1591-1.1617. The retracement was about 38.2% of the fall from 1.1665 to 1.1591.
On Tuesday, the new support is the level of 1.1588 (67 gr.). After that, sellers will be able to reach the level of 1.1561 (90 degrees). Given the three tops on the hourly chart (around 1.1665), there are risks of falling to 1.1560 (90 degrees and Fibo 76.4% of growth from 1.1524 to 1.1669). Buyers need to close the day above 1.1635 to offset the bearish sentiment for the euro.
The Briton also has an ambiguous situation. The price is trading near the 1.3745 support. If sellers disassemble it, the road to the level of 1.3670 will open for them.
The direction of the UST10 yield will be decisive for many major pairs.
Summary: on Monday, the euro fell 0.30% amid weak data from the IFO and statements by ECB spokesman Kos on inflation and economic recovery. The euro found support at 1.1591. Market participants are chained to reports on GDP for the 3rd quarter, as well as the ECB meeting and K. Lagarde's press conference (Thursday). Taking into account the "dovish statements" of the ECB representatives, before the meeting there is a high probability of updating the minimum of 1.1591.