EUR/USD fluctuates around 0.9840s as the US dollar weakens

• EUR/USD bounces off YTD lows nearby 0.9800 as price action gets overextended.
• Sentiment remains negative, though it failed to underpin the greenback.
• US jobless claims were better-than-expected, while the EU’s consumer confidence disappointed.

The shared currency is almost flat after hitting a fresh YTD low at 0.9806 after September’s Fed interest rate decision. The central bank further confirmed an aggressive approach, with most policymakers expecting additional increases to the Federal funds rate; therefore, the interest rate differentials between the EU and the US are a headwind for the EUR/USD.

The EUR/USD began trading at around the day’s lows and hit a daily high of 0.9907 before paring those gains and settling around current spot prices. At the time of writing, the EUR/USD is trading at 0.9842, registering minimal gains of 0.03%.

EUR/USD recovers some ground amidst a soft greenback

Global equities remain under pressure after Fed Chair Powell and Co. raised rates. The US Department of Labor reported that Initial Jobless Claims for the week ending on September 17 increased by 213K below the 217K forecasted, delineating the “very tight” labor market, as expressed by Chair Powell on Wednesday’s post-Fed decision presser.

Meanwhile, the US Dollar Index erases some of its earlier gains, down 0.09% at 111.347, a tailwind for the EUR/USD. On the contrary, the US 10-year Treasury bond yield remains positive, up at 3.682%, gaining 14 bps, after hitting an 11-year high at around 3.71%.

In the meantime, adding to an already deteriorated economic scenario in the Euro area, the EU’s consumer confidence in September dived to -28.8, exceeding estimates of -25.0. meanwhile, the ECB Governing Council member Isabel Schnabel commented that inflation is still too high, so further rate increases would be needed. While she failed to acknowledge a recession in the Eurozone, she warned that it might be unavoidable in Germany.

What to watch

The EU’s calendar will feature a tranche of S&P Global PMIs for Spain, France, Germany and the Eurozone. On the US front, the US S&P Global PMIs would also be reported, alongside Fed Chair Jerome Powell’s speech at around 18:00 GMT.

EUR/USD Key Technical Levels