ECB Rate Hike Expectations, Weaker Dollar Lift Euro

The Euro is strengthening against the U.S. Dollar on Tuesday as pressure remained on the European Central Bank (ECB) to continue with rate hikes after data on Monday showed Euro Zone inflation came in hotter than expected at 10.7%, a new record. This likely prompted ECB President Lagarde to say the central bank must keep raising rates even if recession risks rise.

Meanwhile in the United States, the U.S. Dollar weakened as Treasury yields declined ahead of the Federal Reserve’s two-day meeting, which begins later today. Traders are also positioning ahead of today’s key jobs and manufacturing growth data.

At 10:32 GMT, the EUR/USD is trading .9935, up 0.0051 or +0.52%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $91.24, down $0.71 or -0.77%.

ECB’s Lagarde Issues Hawkish Warning despite Recession Fears

The ECB must keep raising interest rates to fight off inflation, even if the probability of a Euro Zone recession has increased, ECB President Christine Lagarde said in an interview published on Tuesday.

“Our mandate is price stability and we have to deliver on that using all the tools we have available,” Lagarde told Latvian news outlet Delfi, largely repeating last week’s policy message. “We are determined to do what is necessary to bring inflation back to our 2% target.”

JOLTS’s Job Openings Data, ISM October Manufacturing PMI on Tap

JOLTSs job openings data for September and ISM’s October manufacturing PMI are due to be released on Tuesday. Traders will be scanning the data for hints about the state of the U.S. economy and the potential easing of inflationary pressures.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through 1.0094 will signal a resumption of the uptrend, while a move through .9705 will change the main trend to down.

On the downside, support is a 50% level at .9868. On the upside, resistance is a pair of 50% levels at .9952 and 1.0076. The latter helped stop the rally at 1.0094 on October 27.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .9952 is likely to determine the direction of the EUR/USD into the close on Tuesday.

Bullish Scenario

A sustained move over .9952 will indicate the presence of buyers. If this creates enough upside momentum then look for a near-term surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will signal the presence of sellers. This could lead to a retest of the pivot at .9868. This is also a potential trigger point for an acceleration to the downside.