EUR/USD Faces Return to sub-$0.9650 As Economic Uncertainty Grows

It was a quiet start to the European session for the EUR/USD. Investor confidence was in focus this morning. With the markets in turmoil and the EUR on the back foot, today’s numbers drew plenty of interest.

In October, the Sentix Investor Confidence Index fell from -31.8 to -38.3, following a decline from -25.2 in August. Economists forecast a fall to -34.7.

According to the October report,

• The Index fell to its lowest level since May 2020.
• Uncertainties about the gas and energy situation in winter have not diminished due to the attack on the Nordstream pipelines.
• In addition to economic woes, there is also an increased probability of an escalation of the military conflict in Ukraine.
• The Sentix economic data for Germany signal a catastrophic state of the economic condition.
• While the overall Eurozone index and the situation index fell for a fourth consecutive month, the expectations index fell to an all-time low.

However, with the ECB looking to bring inflation to target, the ECB is unlikely to consider investor sentiment at the next policy meeting.

Today, ECB President Christine Lagarde will participate in the IMF/World Bank Annual Meetings that will draw plenty of attention. The World Bank has issued warnings over the policy goals of central banks to bring inflation to target.

ECB member Philip Lane will also speak today, giving opening remarks at the ECB conference on Monetary Policy.

EUR/USD Price Action

At the time of writing, the EUR was down 0.37% to $0.97040. A mixed start to the day saw the EUR/USD rise to an early high of $0.97531 before falling to a post-stat low of $0.96818.

The EUR/USD fell through the First Major Support Level (S1) at $0.9705 before finding support.

Technical Indicators

The EUR/USD needs to move through S1 and the $0.9761 pivot to target the First Major Resistance Level (R1) at $0.9796 and the Friday high of $0.98168. Following Friday’s jobs report and today’s investor sentiment figures, a pickup in market risk sentiment would support a return to $0.98.

In the case of an extended rally, the bulls will take a run at the Second Major Resistance Level (R2) at $0.9852. The Third Major Resistance Level (R3) sits at $0.9942.

Failure to move through S1 and the pivot would leave the Second Major Support Level (S1) at $0.9670 in play. In the case of an extended sell-off, the EUR/USD pair would likely test support at $0.96.

The Third Major Support Level (S3) sits at $0.9580.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA, currently at $0.98052. The 50-day EMA fell back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A EUR/USD move through R1 ($0.9796) and the 50-day EMA ($0.98052) would give the bulls a run at the 100-day EMA ($0.98329) and R2 ($0.9852). However, failure to move through R1 ($0.9796) and the 50-day EMA ($0.98052) would leave S2 ($0.9670) in play. The 200-day EMA sits at $0.99055.

The US Session

It is a quiet day ahead on the US economic calendar., with no economic indicators for the markets to consider. The lack of US stats will leave the EUR/USD pair in the hands of FOMC member chatter.

FOMC members Evans and Brainard will speak late in the US session, with hawkish chatter likely to weigh on the EUR/USD.