EUR – Dollar stabilizes as US-China trade concerns ease

US President Trump on Tuesday rejected a request from top Democratic lawmakers to meet until the three-week-old US government shutdown ends. With the exception of three Democratic senators, all but three refused to support a Republican-led stopgap funding bill unless Trump and a sufficient number of Republicans agree to extend the enhanced Affordable Care Act tax credits, which are set to expire on December 31st. However, investors will look to Friday's September Consumer Price Index (CPI) report for clues on the future trajectory of inflation. This result is not expected to change the Federal Reserve's intention to cut interest rates by 25 basis points at the end of its two-day policy meeting next week. London Stock Exchange Group (LSEG) calculations using interest rate futures suggest the Fed is expected to cut interest rates two more times this year, including a 25 basis point cut at its meeting on October 28-29. For 2026, the federal funds rate futures market is pricing in three more 25 basis point cuts.

In Europe, Moody's will review France's credit rating on Friday, as Prime Minister Sebastien Lecornu's newly formed government appears to have reached a compromise with left-wing lawmakers on its budget plan, averting further turmoil. S&P Global unexpectedly downgraded France's rating last week, warning that political instability was hindering the government's ability to control its finances. Fitch made a similar decision last month. Furthermore, the European Central Bank will meet next week and is not expected to adjust its monetary policy. The central bank held interest rates unchanged last month and offered a moderately optimistic assessment of the eurozone economy.

As for the euro against the dollar, technical charts show that the exchange rate formed a minor bottom around 1.1540/50 in the middle of this month. With the recent rebound, it has initially broken through the recent downtrend line, suggesting that the euro may stabilize against the dollar in the short term. Resistance levels will initially focus on the 25-day moving average at 1.1695 and 1.18, with significant resistance expected at 1.1850 and 1.1920, potentially reaching the 1.20 mark. The supporting levels are expected to return to 1.1630 and 1.1540, with the key support targeting the levels of 1.15 to 1.14.

Forecast range:
Resistance: 1.1695 - 1.1800 - 1.1850 - 1.1920 - 1.2000
Support: 1.1630 - 1.1540 - 1.1500 - 1.1400*

News summary
20/10
Eurozone's adjusted current account surplus for August was €11.9 billion
Germany's September PPI fell 1.7% year-on-year
Germany's September PPI fell 0.1% month-on-month

Focus:
Thursday
Eurozone October Consumer Confidence Index (22:00)

Friday
Eurozone October PMI

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