EUR/USD pulls back as risk appetite fades in choppy trading week
- The Euro eases to the 1.1530 area from Thursday's weekly highs as the US Dollar firms.
- Risk aversion, US data blackout, and mixed Eurozone figures have led to a choppy trading week.
- The EUR/USD recovery remains capped below a previous support area at 1.1545-1.1550.
EUR/USD nudges down from weekly highs around 1.1550 and trades at 1.1535 in the early European session on Friday. The pair is flat on weekly charts after a choppy trading week, with Eurozone data showing mixed figures and investors flying blind due to the ongoing blackout of official US data.
The US Dollar Index (DXY), which measures the value of the USD against a basket of six majors, is picking up on Friday, with investors wary of risk following another sell-off on Wall Street on Thursday. Fears of an AI bubble hammered tech shares, and the risk aversion has spread through Asian markets, triggering a rush for safety that is underpinning the US Dollar.
On Thursday, a private employment report revealed that net employment declined in the US in October, offsetting the moderate enthusiasm seen after Wednesday's ADP data release and feeding hopes of a Federal Reserve (Fed) rate cut in December. The US Dollar extended its pullback from three-month highs.
On Friday's calendar, the focus will be on European Central Bank (ECB) and Fed speakers, as the US government shutdown will delay the key Nonfarm Payrolls (NFP) report for the second consecutive month.
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 | 0.13% | 0.14% | 0.29% | 0.00% | -0.13% | 0.38% | 0.21% | |
| EUR | -0.13% | 0.00% | 0.16% | -0.12% | -0.26% | 0.25% | 0.08% | |
| GBP | -0.14% | -0.01% | 0.12% | -0.16% | -0.27% | 0.25% | 0.07% | |
| JPY | -0.29% | -0.16% | -0.12% | -0.25% | -0.40% | 0.10% | -0.06% | |
| CAD | -0.00% | 0.12% | 0.16% | 0.25% | -0.14% | 0.34% | 0.20% | |
| AUD | 0.13% | 0.26% | 0.27% | 0.40% | 0.14% | 0.52% | 0.34% | |
| NZD | -0.38% | -0.25% | -0.25% | -0.10% | -0.34% | -0.52% | -0.18% | |
| CHF | -0.21% | -0.08% | -0.07% | 0.06% | -0.20% | -0.34% | 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: The USD picks up in cautious markets
- Investors' fears about an overvaluation of AI-related fears are bringing memories of the dotcom crash and have sent equity markets tumbling across the board. In the absence of official US economic data to contrast those views, the dismal market mood is providing some support to the USD at the end of a choppy week.
- A report by Revelio Public Labor Statistics showed that net employment declined by 9,100 in October, with public sector jobs dropping from 22,000. Apart from that, cost-cutting and the adoption of artificial intelligence have increased plans for further layoffs.
- These figures boosted hopes of another Fed interest-rate cut in December. The CME Fed Watch Tool shows that chances of a quarter-point cut in December increased to 67% from 62% on Thursday. Still, these are below the levels above 90% seen ahead of last week's Fed meeting.
- Chicago Fed President Austan Goolsbee cooled those hopes, showing hesitation about easing monetary policy further in the absence of key inflation data amid the US government shutdown.
- In Europe, an unexpected contraction in Retail Sales in September offset the optimism after the upbeat services sector activity figures released earlier in the week and acted as headwind for the Euro recovery.
- Data released by Destatis on Friday has shown that the German trade surplus narrowed to EUR 15.3 billion in September, well below the EUR 16.8 billion expected after a downwardly revised EUR 16.9 billion surplus in August. The rise in exports has been offset by a larger increase in imports.
Technical Analysis: EUR/USD remains vulnerable while below 1.1550
The EUR/USD's rebound from three-month lows in the mid-range of the 1.1400s has been capped 100 pips higher, at a previous support area of 1.1545-1.1550 (October 14, 30 lows), which leaves the broader bearish trend from late October highs at 1.1670 in play.
Thursday's impulsive rebound suggests that negative momentum might be easing. Still, Euro bulls should break above 1.1550 to confirm a trend shift and set their target at 1.1580 (October 22, 23 lows) ahead of 1.1635, the October 30 high.
Meanwhile, downside attempts are limited at the 1.1530 area. Further down, the pair might find some support at 1.1500 and then at the November 5 low around 1.1470. 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.
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.
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