EUR/USD fails again at 1.1625 and pulls back to 1.1600 area

  • The euro consolidates near 1.1600 with upside attempts limited below 1.1625.
  • The common currency hesitates ahead of ECB’s monetary policy decision.
  • EUR/USD is expected to drop towards 1.1524 – Scotiabank.

Euro-dollar’s rebound from 1.1585 lows witnessed during Wednesday’s European trading session has been unable to extend past 1.1625 and the pair retreated to the 1.1600 area.

The euro treads water awaiting the ECB

The pair remains practically flat for the second consecutive day in a rather calm market on Wednesday. The euro is looking for direction with all eyes on the ECB’s monetary policy decision with the USD in a soft tone, as the Dollar Index edges down 0.1% on the back of lower US T-Bond yields and mixed macroeconomic data.

Investors are positioning for a dovish message by the European Central Bank, which is expected to maintain its bond-purchasing plan unchanged and the benchmark interest rate near zero, in spite of the persistently high inflation, to avoid creating tensions in some peripheral markets.

On the macroeconomic front, in the absence of relevant Eurozone releases, orders for durable goods manufactured in the US have contracted less than expected in September, due to a solid increase of non-defense capital goods. These figures suggest that US businesses have continued spending in equipment, in spite of the disruptions caused by supply restrictions.

On the other hand, the US goods trade deficit widened to $96.3B in September from $89.4B in the previous month due to a sharp decline in exports.   

EUR/USD: Expected to extend losses towards 1.1524 – Scotiabank

The FX Analysis team at Scotiabank observes the pair biased lower, targeting 1.1524 area: “The German and Eurozone economy more broadly are expected to decelerate significantly in the fourth quarter – pointing to moderate weakness ahead in the EUR (…) The EUR’s bearish reversal is likely to extend past the high-figure zone after support at 1.1572, setting the 1.1524 October low in its sights.”

Technical levels to watch