EUR/USD picks up from three-month lows as risk sentiment improves
- The Euro trims some of the recent losses and returns above 1.1500 as risk appetite improves.
- Upbeat US employment and services sector data are underpinning the US Dollar.
- ECB speakers and Eurozone Retail Sales might set the pair's direction on Thursday.
EUR/USD posts moderate gains for the second consecutive day on Thursday, trading at 1.1505 at the time of writing, up from the three-month lows at 1.1468 hit earlier this week. Equity markets bounced up as concerns about the US tech sector eased, and better-than-expected European corporate earnings have eased fears about the region's economic outlook.
The Euro's recovery, however, remains limited as the US Dollar remains firm after the publication of strong US macroeconomic data. ADP figures for October beat expectations, and the services sector's activity accelerated at a faster pace than expected, with new orders showing a significant increase. These figures cast further doubts on a Federal Reserve (Fed) interest-rate cut in December and are likely to limit the US Dollar's downside attempts.
On Thursday's economic calendar, some European Central Bank speakers are scheduled to speak, but the highlight will be the Eurozone Retail Sales release. In the US calendar, a slew of Fed speakers will be observed with interest after the positive surprise from the ADP Employment Report.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.04% | -0.09% | -0.05% | -0.07% | 0.07% | -0.11% | |
| EUR | 0.17% | 0.13% | 0.07% | 0.12% | 0.10% | 0.24% | 0.06% | |
| GBP | 0.04% | -0.13% | -0.04% | -0.01% | -0.03% | 0.12% | -0.07% | |
| JPY | 0.09% | -0.07% | 0.04% | 0.04% | 0.03% | 0.14% | -0.01% | |
| CAD | 0.05% | -0.12% | 0.00% | -0.04% | -0.01% | 0.10% | -0.06% | |
| AUD | 0.07% | -0.10% | 0.03% | -0.03% | 0.01% | 0.14% | -0.03% | |
| NZD | -0.07% | -0.24% | -0.12% | -0.14% | -0.10% | -0.14% | -0.18% | |
| CHF | 0.11% | -0.06% | 0.07% | 0.00% | 0.06% | 0.03% | 0.18% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Euro appreciates as risk aversion ebbs
- The Euro is trimming some losses amid a higher appetite for risk, with equity markets trading back in the green. A sharp recovery, however, is off the cards as the positive US data has strengthened the case for Fed hawks, which supports the USD.
- US data beat expectations on Wednesday, contributing to improving investors' mood. The ADP Employment Change showed 42,000 new jobs in October, after an upwardly revised 29,000 decline in September and beating expectations of a 25,000 increase.
- The US ISM Services Purchasing Managers' Index revealed a stronger-than-expected business activity. The index jumped to 52.4 in October from 50.0 in the previous month, above the 50.8 consensus. New Orders increased to 56.2 from 50.4.
- Market expectations of a Fed rate cut in December have declined to 62% from 68% earlier this week and above 90% before last week's monetary policy meeting, according to data from the CME Group's FedWatch Tool.
- Also on Wednesday, the final Eurozone HCOB Services PMI increased to 53.0 in October, up from the previous month's 51.3 reading, surpassing the preliminary estimate of 52.6.
- Estimates from the LSEG data firm released by Reuters revealed that European corporates are expected to report an average growth of 4.3% in the third-quarter earnings, beating expectations of the 0.4% growth forecasted by market analysts.
- Later on Thursday, European Retail Sales are expected to show a 0.2% increase in September, following a 0.1% growth in August. Year-on-year, retail consumption is seen growing at a steady 1% pace.
Technical Analysis: EUR/USD corrects higher within the broader bearish trend
The EUR/USD pair appreciates further on Thursday, putting some distance from the mid-term lows near 1.1470 hit earlier this week. The 4-hour Moving Average Convergence Divergence (MACD) has crossed above the signal line, and the Relative Strength Index (RSI) is about to test the key 50 area, which endorses the view of a bullish correction after a nearly 1.5% sell-off following the Fed's hawkish shift seen last week.
Bulls, however, are likely to meet significant resistance at a previous support area near 1.1545 (October 14, 30 lows). If this level gives way, the next target is around 1.1580 (October 22, 23 lows) ahead of 1.1635, the October 30 high.
On the downside, immediate support is in the area of 1.1470, which held bears on Tuesday and Wednesday. Further down, the measured target of the broken triangle pattern, which meets the price at the 261.8% Fibonacci retracement of the late October rally, is near 1.1440. August's low comes around 1.1390.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.