Euro fluctuates, Fed adopts hawkish stance; will tonight's inflation data be a lifeline?
2025-10-31 15:35:29
The euro traded around 1.1560 against the dollar on Friday (October 31), with the market exhibiting caution. The major currency pair struggled to mount a significant rebound as the dollar remained strong, supported by multiple positive factors – diminished market expectations of a dovish stance from the Federal Reserve and continued improvement in trade tensions.
The dollar index is consolidating its strong gains from the previous two trading days after hitting its highest level since early August (99.72) on Thursday, which is a key factor limiting the euro's rise against the dollar.
At the press conference following Wednesday's 25 basis point rate cut to 3.75%-4.00%, Federal Reserve Chairman Jerome Powell stated that further monetary easing in December is "far from a done deal," and market expectations for a dovish stance from the Fed have gradually cooled. Against this backdrop, any meaningful depreciation of the dollar now seems unlikely. In fact, Chairman Powell has explicitly refuted market expectations of another rate cut in December, and coupled with renewed safe-haven demand, these factors will help prevent the dollar from experiencing further significant declines.
On the other hand, the European Central Bank (ECB) kept its key deposit rate unchanged at 2% for the third consecutive day on Thursday, stating that inflation remains close to its medium-term target of 2%. However, the ECB also warned that the eurozone's economic outlook remains uncertain due to global trade disputes and geopolitical tensions. Furthermore, policymakers are divided on future interest rate cuts, which could dampen aggressive bullish bets on the euro, thus limiting its upside potential against the dollar.
During Friday's trading session, the market will focus on the preliminary reading of the Eurozone's October Harmonized Index of Consumer Prices (HICP), due at 18:00 Beijing time.
Technical Analysis
The euro traded around 1.1570 against the dollar on Friday, remaining within Thursday's trading range. The short-term trend remains bearish as the pair is below its 20-day moving average (MA, 1.1622).
The Relative Strength Index (RSI) hovered around 40.00 on the 14th, below the midline but not into the oversold zone, reinforcing the short-term bearish momentum.
On the downside, if the exchange rate falls below the October 30 low of 1.1546, it may further test the August 5 low of 1.1527, and then test the support level of the August 1 low of 1.1391.
On the upside, if the exchange rate breaks through the October 17 high of 1.1727, it may open up upward space and gradually test the resistance levels of the July high of 1.1829 and the psychological level of 1.1900.
(Euro/USD daily chart, source: FX678)
At 15:28 Beijing time, the euro was trading at 1.1560/61 against the US dollar.
The dollar index is consolidating its strong gains from the previous two trading days after hitting its highest level since early August (99.72) on Thursday, which is a key factor limiting the euro's rise against the dollar.
At the press conference following Wednesday's 25 basis point rate cut to 3.75%-4.00%, Federal Reserve Chairman Jerome Powell stated that further monetary easing in December is "far from a done deal," and market expectations for a dovish stance from the Fed have gradually cooled. Against this backdrop, any meaningful depreciation of the dollar now seems unlikely. In fact, Chairman Powell has explicitly refuted market expectations of another rate cut in December, and coupled with renewed safe-haven demand, these factors will help prevent the dollar from experiencing further significant declines.
On the other hand, the European Central Bank (ECB) kept its key deposit rate unchanged at 2% for the third consecutive day on Thursday, stating that inflation remains close to its medium-term target of 2%. However, the ECB also warned that the eurozone's economic outlook remains uncertain due to global trade disputes and geopolitical tensions. Furthermore, policymakers are divided on future interest rate cuts, which could dampen aggressive bullish bets on the euro, thus limiting its upside potential against the dollar.
During Friday's trading session, the market will focus on the preliminary reading of the Eurozone's October Harmonized Index of Consumer Prices (HICP), due at 18:00 Beijing time.
Technical Analysis
The euro traded around 1.1570 against the dollar on Friday, remaining within Thursday's trading range. The short-term trend remains bearish as the pair is below its 20-day moving average (MA, 1.1622).
The Relative Strength Index (RSI) hovered around 40.00 on the 14th, below the midline but not into the oversold zone, reinforcing the short-term bearish momentum.
On the downside, if the exchange rate falls below the October 30 low of 1.1546, it may further test the August 5 low of 1.1527, and then test the support level of the August 1 low of 1.1391.
On the upside, if the exchange rate breaks through the October 17 high of 1.1727, it may open up upward space and gradually test the resistance levels of the July high of 1.1829 and the psychological level of 1.1900.
(Euro/USD daily chart, source: FX678)
At 15:28 Beijing time, the euro was trading at 1.1560/61 against the US dollar.
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