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Title: EUR/USD regains upside traction around 0.9900 ahead of Fed

November 02,2022 05:55 AM ET


Buyers seem to have returned to the European currency and helped the EUR/USD regain the 0.9900 area on Wednesday.

The EUR/USD is moderately advancing and giving up part of the recent decline, managing at the same time to regain the 0.9900 area amid renewed selling pressure on the greenback.

In fact, the pair is flirting with the key 9-month line near 0.9900, above which the pair's downward pressure is expected to ease and thus allow for additional gains on the relatively short-term horizon.

The recovery in spot rates comes amid the lack of widespread traction in US and German yields, all ahead of the key FOMC event later in the European evening. It is worth recalling that the Fed is expected to raise rates by 75 basis points, while Powell's press conference could unveil details on a potential pivot in Fed policy in the coming months.

On the domestic calendar, the German trade surplus widened to €3.7 billion in September, while the October labor market report showed that the unemployment rate rose by 8,000 and remained unchanged at 5.5%. In addition, the final figures showed that the manufacturing PMI declined to 45.1 last month and deflated to 46.4 when it came to the Eurozone as a whole.

The EUR/USD managed to attract some buyers and trigger a corrective bounce to the 0.9900 area mid-week, all accompanied by renewed selling sentiment around the dollar.

Meanwhile, price action around the European currency is expected to closely follow the dynamics of the dollar, geopolitical concerns, and the divergence between the Fed and the ECB. However, the resurgence of speculation around a possible Fed pivot seems to have taken some of the steam out of the latter.

The most prominent themes are the continuation of the ECB's hiking cycle in the face of rising recession risks, the impact of the war in Ukraine, and the lingering energy crisis on the region's growth and inflation outlook.

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