EUR/USD remains steady near lows with Eurozone PMIs on focus

EUR/USD shows moderate losses on Friday, trading a few pips above 1.1600 at the time of writing, on track for a 0.4% weekly decline. The pair remains hovering within recent ranges, with traders awaiting the Eurozone preliminary HCOB Purchasing Managers’ Indexes (PMIs) for October and the US Consumer Price Index (CPI) release, due later on the day.

The common currency has remained on the back foot this week as US President Donald Trump soured market sentiment, threatening new restrictions on software exports to China on Thursday, ahead of next week’s meeting with Chinese President Xi Jinping.

Trade issues remain in the spotlight on Friday, as President Trump revived frictions, this time with Canada, publishing a post on social media assuring that trade negotiations with his northern neighbour have “terminated”, apparently due to an advert that featured former US president Ronald Reagan speaking negatively about tariffs.

The focus now shifts to the Eurozone’s preliminary business activity figures, which are expected to show a moderate slowdown and, above all, the US CPI, the first key economic release since the US government shutdown began, already four weeks ago. US inflation is expected to have accelerated in September, though it is highly unlikely to alter expectations that the Federal Reserve (Fed) will cut rates by 25 basis points next week.

Daily digest market movers: Majors remain in range ahead of key data

• The US Dollar (USD) is moving within recent ranges, on track for a moderate weekly advance as fresh trade woes have kept risk appetite subdued this week. Investors are awaiting US inflation data release due later on Friday, although the main focus remains on the Trump-Xi meeting and the Fed’s monetary policy decision next week.
• In Europe, October’s preliminary Manufacturing PMI is expected to show a slightly deeper contraction, to 49.5 from September’s 49.8 reading. Likewise, the Services activity is forecasted to have slowed down to 51.1 from 51.3 in the previous month.
• Later on the day, the US Bureau of Labour Statistics will release September CPI, which is expected to have risen at a steady 0.4% pace in the month, and 3.1% year-on-year, up from August’s 2.9% reading., The core CPI, however, is seen growing at the same pace as in the previous month, at a 3.1% yearly rate.
• These figures will frame next week’s Fed decision, although investors are practically fully pricing a quarter-point rate cut. The CME Group’s Fed Watch tool shows a 98.9% chance that the central bank will trim its benchmark interest rate by 25 basis points on Wednesday and a 91% chance of another such cut in December.

Technical Analysis: EUR/USD treads water around 1.1600

EUR/USD remains trading within a descending channel, with rallies finding sellers. Recent price action has remained trapped within a narrow range between 1.1620 and the support area at 1.1580, with investors looking for fundamental drivers to determine the pair’s near-term direction.

Technical indicators are pointing lower on the 4-hour chart, with the Relative Strength Index (RSI) unable to regain the 50 level. Bears, however, would need to confirm below the mentioned 1.1580 support to clear the way towards the October 9 and 14 lows, in the area of 1.1545. Further down, the 1.1500 round level appears as a potential target ahead of the channel bottom, now around 1.1450.

Bullish attempts have remained capped below 1.1620, where Thursday’s high meets the channel top. A successful breach of this level would shift the focus towards the October 21 high, around 1.1650, ahead of the October 17 high, at 1.1728.