EUR/USD breaks below 1.1600 amid subdued market sentiment
- The shared currency fell below 1.1600 on mild US dollar strength.
- Central banks: The RBA disappoints investors, despite dropping the YCC, dampening the market optimism.
- Eurozone PMI’s in expansion territory, though lower than expected due to supply bottlenecks and transportation problems.
The EUR/USD retreats from daily tops around 1.1600, down 0.10%, trading at 1.1593 during the New York session at the time of writing. Due to three central banks reviewing their monetary policy stances, the market sentiment is subdued, not risk-on or off, as market participants prepare for the Federal Reserve monetary policy meeting.
On Tuesday in the Asian session, the first one of the three central banks, the Reserve Bank of Australia, maintained rates on hold, dropped the Yield Curve Control and expressed the possibility of a hike rate in 2023. The market sentiment dampened once the decision crossed the wires, as witnessed by the rising Japanese yen and US Dollar, with market participants flying to safe-haven assets.
Meanwhile, the US Dollar Index reclaims the 94.00 threshold, up 0.19% at 94.04 amid lower US bond yields, with the 10-year Treasury yield falling one basis point, sitting at 1.556%
On the macroeconomic front, Eurozone PMI’s for October hit the wires. The German Markit Manufacturing PMI came at 57.8 lower than the 58.2 estimated. Furthermore, the Eurozone Markit Manufacturing PMI increased to 58.3, worse than the 58.5 foreseen by analysts.
Despite being lower than expected readings, production remained strong but was affected by supply chain bottlenecks and logistical problems. Alongside those abovementioned, the shortage of truck drivers continued to hurt the manufacturing sector.
Across the pond, the IBD/TIPP Economic Optimism for November fell for the fifth consecutive month to 43.9, lower than the 46.8 October figure.
EUR/USD Price Forecast: Technical outlook
1-hour chart
The EUR/USD chart shows the pair bounced off 1.1534, towards the 50% Fibonacci retracement at 1.1611, which confluences with Monday’s high and the 100-simple moving average. That area would oppose strong resistance to the pair, and if EUR bulls would like to regain near-term control, they will need to reclaim the 200-SMA at 1.1614.
In the case of that outcome, it would expose the confluence of the 78.6% Fibonacci retracement and the R2 pivot level around 1.1650. On the flip side, failure at 1.1600 would expose the 2021 low at 1.1524.
Therefore, the pair would be trading at narrow ranges ahead of the Federal Reserve. Significant upward or downward moves would be capped around the 1.1543-1.1610 range.