EUR/USD lingers near eight-month low amid economic strains, hawkish Fed

• EUR/USD plummeted below 1.0500 and reached a multi-month low at around 1.0480s.
• The Eurozone’s M3 supply shrinkage reflects broader economic strains, weighed on the EUR/USD.
• Upbeat economic data in the US, along with the Fed’s hawkish rhetoric, a headwind for the Euro.

The Euro (EUR) is extending its losses versus the US Dollar (USD) on Wednesday after reaching an eight-month low at around 1.0488, though traders booking profits ahead of the New York close lifted the major back above the 1.0500 handle. At the time of writing, the EUR/USD is trading at 1.0505, near the lows of the month after it hit a daily high of 1.0574.

EUR/USD struggles to find its foot amid deteriorating economic indicators

Fundamentals continue to weigh on the Euro front after the money supply shrank the most on record in August, as banks halted lending and depositors held to their savings. Further data showed that German Consumer Sentiment, as revealed by GfK, deteriorated further, set to fall in October at -26.5, from September -25.6.

Across the pond, the US Department of Commerce showed that Durable Goods Orders for August exceeded estimates and July’s data, suggesting an improvement in consumer spending. However, on the business side, Transportation equipment slid -0.2%, weighed by fewer orders on civilian aircraft, while the strike of United Auto Workers vs. GM, Stellantis, and Ford could weigh on the economic outlook and could weigh on orders and shipments in September.

On the central bank space, European Central Bank (ECB) officials remain hawkish, but inflation aside, data puts into discussion a possible stagflation scenario. Minnesota Fed President Neil Kashkari remained hawkish on the US front, foreseeing one more rate hike and opening the door for more than one if needed.

EUR/USD Price Analysis: Technical outlook

Technically speaking, the EUR/USD is at new cycle lows, though it appears the pair could consolidate when the Relative Strength Index (RSI) enters oversold territory, following a 400-pip run from 1.0945 toward current spot prices. If the major drops below 1.0500, the next stop would be the January 6 daily low of 1.0481. A decisive break would clear the way to test intermediate support at the November 30 low of 1.0290, followed by the November 21 low at 1.0222. Conversely, the EUR/USD first resistance would be 1.0600.