• EUR/USD price slips below 1.1770, pressured by weaker German IFO data and cautious Fed messaging that bolstered the US Dollar.
• Fed narrative shifting: Powell remains cautious on cuts, Miran calls for bolder easing, but markets scale back bets on two 2025 rate cuts.
• The euro outlook remains fragile, with manufacturing weakness and tariff-related pressures offsetting the resilience of the service sector.

The EUR/USD price, which had reached yesterday’s highs above 1.1800, slipped to the mid-1.1700 area due to sour market sentiment and downbeat German data. The German IFO Business Climate index reported weaker sentiment, reducing optimism for subsequent months.

On the other hand, the US dollar regained traction after the Fed Chair’s remarks underscored the risk of inflation, along with a fragile labor market outlook. He maintained a cautious tone with doors open for further cuts. Moreover, diverging voices within the Fed further complicated the situation. Governor Bowman urged a quicker rate reduction to safeguard the jobs market, while Stephen Miran warned against policy overtightening. However, markets no longer price in two more rate cuts this year, revealing a shift in expectations.

On the data front, the US flash PMI data confirmed a slowdown in activity for the second consecutive month in September. The composite index came in at 53.6, against the expected 54.0. The input costs rose while output prices softened, squeezing the margins. However, reading above 50.0 suggests resilience, supporting the Fed’s cautiousness.

On the other hand, Eurozone PMI data showed a mixed scenario, as manufacturing slipped to 49.5 against an expected 50.7, while services increased to 51.2, up from 51.0. The divergence highlights Europe’s increased reliance on services, while manufacturing remains vulnerable.
 

Key Events Ahead

• US New Home Sales (Wednesday): Near-term data focus, gauging consumer and housing resilience.
• San Francisco Fed President Daly Speech (Wednesday): Could provide clarity on Fed policy divisions.
• US PCE Inflation (Friday): A significant risk event; a soft print could lift EUR/USD temporarily toward 1.1800.
• Eurozone Economic Data (IFO, PMIs follow-up): Continued signs of manufacturing weakness will weigh on euro sentiment.
• Fed November Meeting: The ultimate driver of medium-term EUR/USD direction, as policy divergence becomes clearer.
   

EUR/USD technical price analysis: Bears gathering pace near channel support
 

(Click on image to enlarge)

EUR/USD 4-hour chart
 

The EUR/USD 4-hour chart shows consolidating price action within the rising channel. The price has moved well below the 20-period MA, aiming to test the channel support around 1.1730 ahead of 200-period MA support at 1.1700.

On the flip side, the immediate resistance appears at the confluence of 20- and 50-period MAs near 1.1780 ahead of yesterday’s top at 1.1820. However, the path of least resistance lies on the downside as the channel support looks vulnerable.

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