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EUR/USD holds firm at around 1.1550 on Monday, virtually unchanged as the Greenback trims some of its earlier losses amid news that the White House backs a deal to end the US shutdown in the coming days, as reported by Bloomberg. At the time of writing, the pair trades flat at 1.1560.

Speculation of US government reopening caps Euro’s advance

The White House expressed support for a bipartisan deal aimed at reopening the government within days. Despite voting and passing the legislation in the US Senate, House Representatives must come back to Washington, as the House Speaker Mike Johnson would give 36 hours’ notice to return to the Capitol once the Senate passes the bill.

In the meantime, the US government shutdown entered its 41^st day, and amid the lack of economic data, market participants continued to lean on speeches by Federal Reserve (Fed) officials.

Last week, dismal jobs data revealed by the Challenger report showed that private companies are laying off workers. Meanwhile, the Consumer Sentiment prepared by the University of Michigan (UoM) showed that households are growing pessimistic about the economy.

In Europe, the docket was scarce, featuring European Central Bank (ECB) speakers, led by Vice President Luis de Guindos, and policymakers François Villeroy de Gelhaus and Joachim Nagel.

Daily market movers: EUR/USD consolidates, as US government reopening looms

• The US Dollar Index (DXY), which tracks the performance of the American currency against other six, holds firm at 99.56.
• The Trump administration expressed support for the bipartisan deal to end the US government shutdown, approved on Sunday.
•  Fed Governor Stephen Miran was dovish, eyeing a 50 bps cut in the December meeting. Contrarily, St. Louis Fed Alberto Musalem commented that the economy remains resilient and that inflation is closer to 3% than 2%.
• Earlier, San Francisco Fed Mary Daly noted that goods inflation has been “pretty contained,” but acknowledged that recent rate cuts have helped the labor market while adding some upward pressure on overall prices.
• Last week’s Challenger report showed employers announced 153,000 job cuts in October — the highest for that month in two decades. Money markets now price a roughly 66% chance of a Federal Reserve rate cut in December, up from 62% a week earlier, reflecting growing expectations of policy easing amid signs of a cooling labor market.
• Consequently, the divergence on monetary policy between the European Central Bank and the Federal Reserve suggests that further EUR/USD upside is expected.
• European Central Bank Vice President Luis de Guindos said Monday that the current level of interest rates is “appropriate,” noting that inflation is moving closer to the 2% target. Meanwhile, other policymakers have urged caution, emphasizing the need to remain vigilant against lingering price pressures.
• Looking ahead, investors will turn their attention to Tuesday’s release of the German and Eurozone ZEW Economic Sentiment Index for fresh insights into the region’s growth outlook.

Technical outlook: EUR/USD to remain subdued below 1.16

Despite posting back-to-back bullish days, EUR/USD seems poised to remain downward biased, as sellers lack the strength to push the exchange rate towards the 200-day Simple Moving Average (SMA) at 1.1350.

If the pair remains below key resistance at the 20-day SMA at 1.1592, this will keep key resistance levels out of reach, like 1.1600, then look for a recovery towards 1.1700.

On the flip side, if EUR/USD drops below 1.1500, expect a test of the August 1 cycle low of 1.1391.

(Click on image to enlarge)

EUR/USD daily chart

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