EUR/USD remains constrained beneath 1.1500, thereby exposing the 1.1450 support area. Fed’s Goolsbee reiterated that the US faces an inflation issue, suggesting the possibility of additional rate hikes in the future. In Europe, the increasing uncertainty in Germany has counterbalanced the favourable effects of declining oil prices. The Euro is consolidating last week’s decline against the US Dollar on Monday, with price action capped below 1.1500 and the seven-week low in the mid 1.1400s still on the bears’ radar. The decline in oil prices has not offered substantial support to the Euro, which continues to be under pressure due to the Federal Reserve’s hawkish repricing and increasing political uncertainty in Germany.
Chicago Fed President Austan Goolsbee has reinforced those views, stating that the US central bank “right now does not have an employment problem; it does have an inflation problem,” at a Monetary Policy forum in London. News from Germany exerted further pressure on the Euro. German Chancellor Friedrich Merz’s CDU party faced a significant defeat in Berlin at the hands of the left, marking the most severe setback in postwar Germany during the state elections in Mecklenburg-Western Pomerania against the Eurosceptic and pro-Kremlin Alternative for Germany. Merz has pledged to remain in office to implement the economic reforms, yet enquiries regarding his backing are expected to emerge.
In the calendar this week, attention will be directed toward the preliminary Purchasing Managers Index figures from the Eurozone and the US, scheduled for release on Wednesday. These figures are expected to offer additional insights into the economic momentum of their respective economies. The EUR/USD pair was unable to surpass the 200-day simple moving average last week, leading to further depreciation before encountering support around the 1.1450 level. Momentum indicators on 4-hour charts continue to reflect a negative outlook, with the Relative Strength Index positioned just above oversold territory and the Moving Average Convergence Divergence lingering below zero. This indicates that any potential bounces may face limitations.
Attempts to move higher have thus far been constrained beneath the 1.1500 threshold, which limits the trajectory toward the lows observed on August 13 and September 14 around the 1.1520 mark, as well as the lows from September 2 close to 1.1570. On the downside, a clear break below Friday’s lows, at 1.1456, may encounter support at the 78.6% Fibonacci retracement of the August recovery, positioned at 1.1410, preceding the June-July trough, within the 1.1325-1.1365 range.
