EUR/USD experienced a decline of 0.6% on Tuesday due to risk-off flows dragging the Fiber down, with geopolitical tensions and weak economic data souring investor sentiment. The Eurozone Harmonized Index of Consumer Price (HICP) inflation dropped more than expected in September, with core HICP inflation falling to 2.7% on an annual basis and headline inflation decreasing to 1.8%, below the forecast of 1.9%.
As investors await Friday’s Nonfarm Payrolls (NFP) report, European economic data will take a backseat. The US ISM Manufacturing PMI remained at 47.2 for the second consecutive month in September, lower than the expected increase to 47.5. JOLTS Job Openings in August surged to 8.04 million, but the ISM Manufacturing Employment Index declined to 43.9, indicating a decrease in job hires.
Geopolitical concerns have also come into play, with focus shifting to the Middle East following reports of Iran launching a missile attack against Israel in response to recent incursions into Lebanon. The US has promised to support Israel in the conflict, causing apprehension among investors about potential escalation.
EUR/USD price action on Tuesday fell near the 50-day Exponential Moving Average (EMA) around 1.1045 before bouncing off slightly. With the pair struggling to regain momentum, buyers are now looking to bring the bid line back above the 1.1100 level. The overall trend remains bearish, with buyers on the defensive due to the recent decline from yearly highs above 1.1200.
The Euro is the currency for the 19 European Union countries in the Eurozone and is the second most traded currency globally after the US Dollar. The European Central Bank (ECB) in Frankfurt oversees monetary policy for the Eurozone, with primary goals of maintaining price stability and controlling inflation or stimulating growth through interest rate adjustments. Data releases on inflation, GDP, and trade balance, among others, influence the health of the Euro and its exchange rate with the US Dollar. 75% of the Eurozone economy is contributed by Germany, France, Italy, and Spain, making economic data from these countries crucial for Euro performance. Trade balance is also a key indicator affecting the Euro’s strength, with positive balances strengthening the currency.
