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Euro Worst Performer Past 24-hours after Fed, Weakening Euro-Zone CPI

Euro Worst Performer Past 24-hours after Fed, Weakening Euro-Zone CPI

2013-10-31 10:15:00
Christopher Vecchio, CFA, Senior Strategist
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Talking Points:

- The European currencies remain marginally weaker against USD post-FOMC.

- Light calendar for both Euro, Pound offer little for data-driven reversals.

- Euro-Zone Unemployment Rate back at all-time high.

To keep up with the European data and news as the week goes forward, be sure to sign up for my distribution list.

Intraday Price Perspective

Euro_Worst_Performer_Past_24-hours_after_Fed_Weakening_Euro-Zone_CPI_body_x0000_i1029.png, Euro Worst Performer Past 24-hours after Fed, Weakening Euro-Zone CPI

Approaching the midway point of the European trading session, the European currencies have remained out of favor in the wake of the Fed’s policy decision. While QE3 was kept on hold, the tone of the report wasn’t as dovish as the market may have anticipated, which has led to a modest USD-positive reaction the past 24-hours.

In fact, a look at the Strong/Weak app shows that the EURUSD has been the worst performing currency pair over the past rolling 24-hour period (D1), with the m15, H1, and H4 timeframes indicating that weakness continues to persist. The recent Euro-Zone inflation and labor market data have helped accelerate Euro selling in the near-term.

TECHNICAL ANALYSIS – CHART OF THE DAY

EURUSD H1 Chart: October 6 to Present

Euro_Worst_Performer_Past_24-hours_after_Fed_Weakening_Euro-Zone_CPI_body_x0000_i1030.png, Euro Worst Performer Past 24-hours after Fed, Weakening Euro-Zone CPI

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The EURUSD lost support near 1.3740 yesterday after the Fed meeting, and the subsequent rebounds in price as seen on the H1 chart and lower timeframes show former support turning resistance. For now, a top near 1.3830 may have developed.

Price has traded through the 38.2% retracement from the October 16 to 25 high/low range at 1.3694, though near-term support comes in at 1.3652 (50% retracement). 1.3650/7000 contained the EURUSD from October 17 to 22, and a breach below this range would suggest a more considerable selloff is gathering pace.

Here's a look at the data out of Europe this morning that's influencing price action:

EURO-ZONE ECONOMIC CALENDAR

Euro_Worst_Performer_Past_24-hours_after_Fed_Weakening_Euro-Zone_CPI_body_Picture_1.png, Euro Worst Performer Past 24-hours after Fed, Weakening Euro-Zone CPI

The past week has been characterized by a light flow of data out of the Euro-Zone, and while that continues today, there are a few “medium” or “high” importance events that are worth paying attention to. Earlier, September German Retail Sales missed expectations, but data leading up this release suggested that broad Euro-Zone growth may have slowed into the end of the 3Q’13, so the figures weren’t much of a surprise.

What was a surprise, contributing to the Euro’s continued weakness this morning, was the plunge in the regional inflation rate back to its November 2009 low, and the Euro-Zone Unemployment Rate returning to its all-time high in September.

The weak growth data arrived at the ideal time to take advantage of EUR-weakness, considering that the EURUSD had been the worst performing currency pair over the past 24-hours.

Read more: Europe’s Relative Calm Boosting Interest in the Euro

UK ECONOMIC CALENDAR

Euro_Worst_Performer_Past_24-hours_after_Fed_Weakening_Euro-Zone_CPI_body_x0000_i1028.png, Euro Worst Performer Past 24-hours after Fed, Weakening Euro-Zone CPI

British economic data was light today, as it’s been the psat several days, although the downtick in the GfK Consumer Confidence Survey for October is unwelcomed. It is important to consider that the German GfK Consumer Confidence Survey for October, released today as well, showed a small downtick.

Both of Western Europe’s growth engines, especially in 2013 – Germany and the United Kingdom – are showing signs that the October US fiscal fight may have been more damaging to global confidence than initially suspected.

Read more: UK Growth Rate Accelerating but GBP/USD Profit Taking May Begin

SWISS ECONOMIC CALENDAR

There is no data on the Swiss Franc economic calendar for Thursday, October 31, 2013.

Read more: US Dollar: Next Leg of Collapse Rests in FOMC’s Hands

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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