Eurusd falls 0.6% amid U.S. budget deficit and declining euro area sentiment

EURUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.6%	-63.9 Pips
Week to-date	-1.43%	-152.9 Pips
November	-2.98%	-324.1 Pips

Upcoming key events (London Time)

Thu 10:00 AM EUR GDP (seasonally adjusted) (3-mth)
Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)
Thu 08:00 PM USD Federal Reserve Chair Jerome Powell speech
Fri 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In the United States, the Monthly Treasury Budget Statement for October revealed a significant shift from a surplus of $64 billion in September to a deficit of $257 billion, as reported by the Bureau of the Fiscal Service. Meanwhile, the Consumer Price Index (CPI) inflation rate, both including and excluding food and energy sectors, demonstrated some stability. The overall CPI inflation rate rose slightly from 2.4% to 2.6% in October, while the CPI excluding food and energy remained constant at 0.3% month over month and 3.3% year over year, according to the Bureau of Labor Statistics. These figures indicate modest inflationary pressures in the U.S. economy, although price levels stayed relatively stable compared to the previous month.

In Europe, specifically within the euro area and Germany, there were notable declines in economic sentiment as measured by the ZEW Survey. The euro area’s Economic Sentiment dropped to 12.5 points in November from 20.1 points in October, and the German ZEW Indicator of Economic Sentiment fell to 7.4 points from 13.1 points. Additionally, the Economic Situation in Germany reflected a deeper negative outlook, with a new score of -91.4 points, down from -86.9 points. Germany’s Harmonized Index of Consumer Prices (HICP) remained unchanged at 2.4% year over year in October, as reported by Destatis, indicating that inflationary pressures in Germany were stable with no month-over-month change in October at 0.4%.

These economic developments could influence the EURUSD currency pair. With the U.S. recording a significant budget deficit and stable inflation, the Federal Reserve may face pressure regarding monetary policy adjustments, especially if the upcoming speeches by Chair Jerome Powell and the PPI reports indicate possible shifts. On the other hand, economic sentiment in the euro area has declined, which may weigh negatively on the euro. The decline in EURUSD on Wednesday, dropping by 0.6% to 1.05620, may reflect these concerns, with market participants adjusting positions ahead of new data releases such as the EUR GDP figures and U.S. Federal Reserve updates. If U.S. economic conditions introduce optimism or if the euro area continues to face challenges, EURUSD may continue to experience downward pressures.

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What can we expect from EURUSD today?

EURUSD on Wednesday dropped -0.6% to 1.05620. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for EURUSD looks bearish as the pair posted lower in Wednesday trading session.

Looking ahead for the day, immediate support level is at S1 1.0527 with break below could see further selling pressure towards S2 at 1.0492. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.06540 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.05555 would indicate selling pressure.

For the week to-date, take note that EURUSD is bearish as the pair posted lower by -1.43%.

Key levels to watch out:

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