EURUSD Nears 11-Week Low: All Eyes on ECB and US Data

Pre-event anxiety challenges market momentum

Financial markets remain sidelined early Thursday, consolidating previous moves, as traders prepare for a “Super Thursday” comprising the European Central Bank (ECB) Interest Rate Decision and the US Retail Sales. Also restricting the market moves are mixed geopolitical headlines surrounding the Middle East and China.

The US Dollar Index (DXY) reached its highest level since early August, buoyed by a hawkish Fed bias, even after unimpressive data the previous day. The dollar’s strength was further supported by weak UK inflation and worries about possible rate cuts from the ECB. Additionally, uncertainty around the Bank of Japan’s future rate hikes and increasing talk of a dovish shift from the Bank of Canada also helped the Greenback stay strong.

Meanwhile, news of Israel’s efforts to improve the humanitarian situation in Gaza and China’s housing stimulus kept traders optimistic, pushing Gold prices higher. However, Crude Oil didn’t react positively to a surprise draw in weekly inventories, as a stronger USD and expectations of increased supplies and lower energy demand weighed on prices.

EURUSD bears the burden of dovish ECB concerns, EU economic woes

Alongside the overall strength of the US Dollar, increasing concerns about the Eurozone’s economic transition, particularly recession fears and anticipated ECB rate cuts, are weighing on EURUSD prices. Recent data from the Eurozone indicates slowing inflation, weak growth, mixed sentiment, and lackluster employment conditions, further contributing to the pressure on the euro.

GBPUSD drops but USDJPY lacks momentum

GBPUSD is feeling the pressure from disappointing UK inflation data, particularly slow service inflation, amid new doubts about the Bank of England's stance on lowering rates. Market participants are also divided on the prospects for British economic growth and the new government's ability to revitalize the economy.

Japan’s September exports saw their first drop in 10 months. This disappointing trade data, along with comments from Bank of Japan policymaker Seiji Adachi, is helping to support USDJPY prices, even though the pair is having trouble climbing higher.

Antipodeans consolidate, commodities keep the trend

The Australian, New Zealand, and Canadian dollars are showing resilience against the US Dollar's strength, recovering some previous losses as commodities maintain their trends. Notably, Gold is poised for a fresh all-time high, while Crude Oil bears are losing momentum.

Earlier in the day, China’s Housing Minister and People’s Bank of China (PBoC) Deputy Governor tried to boost the morale of the housing market by announcing details of mortgage reliefs and urbanization projects.

That said, a strong Australian employment report, along with news of China’s housing stimulus, boosted the AUDUSD pair. This surge comes as the US Dollar bulls struggle to hold their ground ahead of the US Retail Sales data and the ECB's interest rate decision.

NZDUSD is following the lead of its Australian counterpart to reduce weekly losses, even without major local catalysts. Meanwhile, USDCAD bulls are pausing as Crude Oil remains lackluster at multi-day lows, having dropped earlier in the week due to concerns about falling demand and rising supply.

Gold price crossed a three-week-old resistance and braces for a fresh all-time high as traders’ rush for risk-safety fuels the traditional haven. In doing so, the precious metal ignores China woes and the US Dollar’s latest strength.

Crude Oil is struggling at a 12-day low, despite a surprise draw in API weekly inventories. However, easing geopolitical tensions in the Middle East, expectations of increased OPEC+ supply, and reduced demand from China are maintaining a bearish sentiment among traders.

Cryptocurrencies remain firmer

Like Gold, major cryptocurrencies such as Bitcoin (BTCUSD) and Ethereum (ETHUSD) are overlooking the US Dollar's strength, positioning themselves for their biggest weekly gains in four weeks. This rally is fueled by optimism surrounding industry regulations after the US elections and significant inflows into ETFs.

Latest moves of key assets

• WTI Crude oil bears take a breather at a two-week low despite staying pressured for the fifth consecutive day around $70.50 by the press time.
• Gold prints a three-day uptrend as buyers challenge the previous all-time high surrounding $2,685.
• The USD Index seesaws around 103.60 after rising to a two-month high the previous day.
• Wall Street closed with mild gains but the Asia-Pacific shares drifted lower. Further, European and British equities print minor losses during the initial trading hour.
• BTCUSD prints mild losses near $67,500 to pare weekly gains while ETHUSD rises 1.0% on a day to $2,630 at the latest.

Euro may not benefit from ECB but USD can

Looking ahead, the ECB Interest Rate Decision will be the key event of the day, with the US Retail Sales report following closely. Weekly US Jobless Claims and monthly US Industrial Production figures will also attract the attention of intraday traders. On Friday, China's GDP, Industrial Production, and Retail Sales, along with UK Retail Sales and US housing data, will help maintain market momentum.

The ECB is expected to cut benchmark rates by 0.25%, which could put downward pressure on EURUSD and boost the US Dollar. However, the real focus will be on the ECB's statement and President Christine Lagarde’s press conference, as Euro bears will look for hints about further rate cuts that could significantly impact the currency pair and strengthen the US Dollar.

In the US, Retail Sales and other secondary data could support hopes for a "soft landing," benefiting US Dollar bulls and challenging commodity buyers while weighing on Antipodean currencies. However, any disappointing US data could impact the already strong US Dollar, potentially boosting Gold prices and halting declines in other commodities and currencies.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!