EUR/USD falls, extending last week’s losses
- German PPI falls 1.4% YoY in September
- USD benefits from the “Trump Trade”
- EUR/USD hovers around a 2.5-month low
The EUR/USD is falling, extending losses into a fourth straight week amid a stronger U.S. dollar and after German wholesale inflation data pointed to further ECB rate cuts in December.
German PPI fell -1.4% YoY in September, below forecasts of 0.8% and following a 0.8% decline in August. The data points to a weaker demand environment and suggests that consumer price inflation could fall further.
The continued decline in producer prices could lift the market's expectations of an ECB rate cut in December. The central bank reduced rates by 25 basis points last week and appeared to be shifting its focus from inflation towards growth.
The weak demand and deteriorating economic outlook could pressure the ECB to reduce rates further. PMI data later this week could influence the market's interest rate outlook further.
Meanwhile, the USD gained last week and is pushing higher at the start of this week, boosted in part by expectations that the Federal Reserve will cut interest rates at a more gradual pace and boosted in part by the Trump trade.
The polls and odds trackers point to an increasing likelihood of Trump winning the US presidential election. Trump’s core policies are considered to be inflationary, boosting the USD.
This week, the US economic calendar is relatively quiet, with PMI data and US durable goods figures due later in the week. Today, attention will be on Fed speakers who could shed more light on the Federal Reserve's next moves.
EUR/USD forecast – technical analysis
EUR/USD fell sharply across the start of October, falling from 1.12 to just above 1.08 last week, marking a 400-point selloff in 17 days. The pair has edged higher from the 1.0810 level, bringing the RSU in from oversold territory, but gains are being capped by the 200 SMA at 1.0870.
Sellers will look to break below 1.08-1.0810 to extend the bearish trend, exposing the rising trendline support at 1.0765.
Buyers will need to rise above the 200 SMA at 1.0870 and 1.09 round number and 1.10.
Oil recovers after falling 8% last week
- Oil rises after more Chinese stimulus
- Middle Eastern tensions ramp up
- Oil steadies below the 71.50-72.50 zone
Crude oil is rising over 1.5% at the start of the week after falling 8% last week. The recovery is being driven by rising Middle East tensions, which threatened to disrupt supply and following more economic stimulus by China, the world's largest oil importer.
Heightened tensions between Israel and Hezbollah increase geopolitical risks in the region, raising worries that supply could be affected. This has increased the risk premium on oil after it had fallen sharply last week when Israel reportedly said that it wouldn't bomb Iranian oil infrastructure.
Meanwhile, China has implemented more stimulus measures, including a lending rate cut in order to revive growth. The PBOC cuts its one and five-year loan prime rate, adding to stimulus measures over previous weeks as authorities seek to restore growth to the 5% target level. This comes after data on Friday showed that the Chinese economy grew at a slow pace in 18 months.
Meanwhile, only downside expectations that OPEC+ will reduce voluntary oil cuts from December could limit oil's upside.
Oil forecast – technical analysis
Oil failed to rise above the 200 SMA, rebounding lower, taking out the 71.50 to 72.50 zone of support.
Sellers will look to extend the selloff further towards the 67.50 support, and below 65.20, the September low, comes into play.
Any recovery would need to retake the 71.5-72.50 zone to negate the near-term downtrend. Above here, the 75.00 round number comes into play.
