The EUR/USD pair is currently at 1.1719, reflecting a minor decline of 0.09% following consecutive bearish sessions. The U.S. Dollar is strengthening as the federal shutdown reaches its third day, resulting in markets lacking essential economic indicators like Nonfarm Payrolls and Initial Jobless Claims. The lack of labor figures compels traders to depend on less robust indicators. Meanwhile, Dallas Fed President Lorie Logan’s caution regarding the upward trend in inflation has introduced a hawkish counterbalance to the increasing expectations for rate cuts. Simultaneously, markets are indicating a 96–97% likelihood of a Fed cut on October 29, with an additional reduction in December anticipated at over 90%. This discrepancy between aggressive statements and accommodating market anticipations is a significant factor contributing to volatility.
On the European front, the euro faces pressure due to indications of decelerating growth. Eurostat confirmed that unemployment increased from 6.2% to 6.3% in August, indicating the first rise in several months. Later today, we anticipate the release of Producer Price Index data and HCOB PMI figures, both of which may exert additional downward pressure if they indicate further signs of disinflation or weak demand. ECB policymaker Martins Kazaks indicated that rates are at a “very appropriate” level, suggesting that no cuts are on the horizon; however, his cautious tone highlights the central bank’s uncertainty. Investors continue to express apprehension regarding Germany’s stagnation, as manufacturing indicators persist in a state of contraction.
The currency pair has maintained a position above 1.1700, which has proven to be robust support for four consecutive sessions. Resistance continues to be significant at 1.1740–1.1750, with a breakthrough required to facilitate a test of 1.1800 and the annual peak at 1.1918. On the downside, a failure to defend 1.1700 exposes 1.1650, followed by the 100-day SMA at 1.1610. Momentum indicators reveal a flat RSI around 50, indicating a state of indecision as traders assess the risks of a shutdown in contrast to the stagnation of the ECB. The current conditions of the U.S. labor market are showing signs of decline. Challenger, Gray & Christmas reported 54,064 job cuts in September, a decrease from 85,979 in August, yet still indicative of a sluggish hiring environment. Job openings increased to 7.23 million; however, the hiring rate decreased to 3.2%, marking the lowest level since June 2024. The shutdown has resulted in a delay of official payroll data, creating policymaking blind spots for the Fed. In light of Logan’s hawkish comments, the prevailing sentiment in the market suggests that easing is on the horizon, which reflects a high probability of a rate cut in October.
The situation regarding the U.S. shutdown is still pending, as Senate Democrats are poised to obstruct yet another short-term funding proposal from the GOP. The Senate is expected to remain inactive over the weekend, prolonging the data blackout into the following week. Throughout Europe, political turbulence continues to impact overall sentiment. France’s new Prime Minister Sebastien Lecornu has committed to reducing the budget deficit to 4.7% of GDP, explicitly excluding the implementation of a wealth tax; however, his current approval rating stands at a mere 16%. The upcoming elections in the Netherlands, set for October 29, introduce additional uncertainty. The current political risks introduce additional volatility for EUR/USD, positioning the 1.1700–1.1750 range as a critical short-term battleground.