ANALYSIS OF EUR/USD: EURO DECLINES AS GEOPOLITICAL RISKS INCREASE

· Analysis of the EUR/USD: Euro is now held back by the Israel-Hamas conflict

· What are this week's top three major events？

· Technical analysis of EUR/USD suggests a potential trend reversal.

Following the sad events at the weekend, the EUR/USD has naturally fallen along with the majority of other risky assets. However, given last week's comeback, there is still some hope for the EUR/USD bulls. Global bond yields have fallen, which may put pressure on US yields when they reopen on Tuesday and might hurt the currency - particularly if there are no further Middle East escalations. Additionally, if the emphasis shifts back to the fundamentals, there is a chance that later in the week, impending US data could fall short of expectations.

Despite being lower, the EUR/USD is still not fully out. Let's take a brief look at the EUR/USD chart before talking about releases from the US later in the week.

Analysis of the EUR/USD: key technical levels

On the weekly time frame, the EUR/USD showed a hammer-shaped candle last week, but there was no sharp increase in price because of the result of the geopolitical developments over the weekend.

But that was the first time in 12 weeks that the EUR/USD candlestick has printed a green candle. Rates may have reached a temporary bottom last week, so it is sense to factor in the possibility of a rally in the coming days.

Despite haven flows supported the dollar and had an influence on riskier currencies like the euro, Monday's price movement was still very bleak.

The bulls must therefore wait for more market movement before placing their belief in the hammer candle from last week. It will now be ideal to go over last week's high of 1.0600, and this will be especially true if rates also rise above 1.0635, the May low that was recently breached.

To regain control, the bears will need a decisive break below the 1.05 handle. They will now need to be patient if that doesn't happen and last week's hammer candle.

WHAT ARE THIS WEEK TOP THREE MAJOR EVENTS？

1. Minutes of the FOMC meetings from October 11 (19:00 BST)

The dollar soared higher along with bond yields last month as a result of the Fed's hawkish pause. The FOMC projected fewer interest rate cuts in 2024—just two instead of four—and left open the potential of one more rate hike before the end of 2023 at that meeting. The market was compelled to raise its previous dovish estimates as a result. More information about the Fed's thinking will be revealed in the minutes of that meeting, which will help to adjust market expectations. But how much of that is now factored into prices？ Any hawkish indications from this source are probably only going to have a little effect on the EUR/USD, in my opinion.

2. S CPI On October 12 at 13:30 BST, a Thursday

The Fed's cycle of tightening seems to be over, but the market doesn't seem to be anticipating a rate cut any time soon. This is because US macro indicators have remained substantially positive when compared to the rest of the world. The dollar bulls will be looking for more support for the Fed's plan to keep interest rates high for a lengthy period of time in the incoming data, such as Thursday's CPI report. Last month, the CPI surprised observers by rising to 3.7% from 3.2%, reversing a 14-month downward trend in price pressures. The EUR/USD may experience some extra pressure relief if CPI continues to show signs of weakness.

3. On October 15 at 15:00 BST, the UoM Consumer Sentiment Index

Since the middle of last year, consumer confidence has usually been rising despite rising borrowing costs and ongoing price pressures. Recent market volatility has been significantly influenced by worries that US interest rates would remain high for a long time. Bond yields have risen to levels not seen since the global financial crisis, but stocks have fallen significantly. If these concerns manifest, consumer spending is expected to decline on non-essential items, which could cause an economic slowdown. The UoM poll will give us a good start on this information. The bulls on the EUR/USD would be looking for poorer consumer confidence or CPI statistics to help shift the tide, whilst if the numbers are high, this might give the bears new momentum.