Will the euro continue to weaken ahead of the ECB meeting? Market participants are closely watching for signs of a trend.

Will the euro continue to weaken ahead of the ECB meeting? Market participants are closely watching for signs of a trend.

25.10.2023

In the U.S. currency market yesterday, the U.S. dollar rebounded against the yen after the October U.S. PMI (Purchasing Managers' Index) released yesterday showed improvements in both the manufacturing and services sectors compared to the previous reading, with both exceeding the benchmark of 50.The USD/JPY pair rose from 149.322 to 149.927. Although it had been trading below the 200-day SMA on the hourly chart, yesterday’s rebound pushed it back above the 200-day SMA. While limited movement is expected until next week’s FOMC meeting, we will be watching closely to see if the USD/JPY moves during U.S. trading hours.

European currencies fell sharply against the yen after yesterday’s release of German manufacturing and services PMI data showed a deterioration in both sectors compared to the previous month.The EUR/JPY pair fell by approximately 1.4 yen, from 159.916 to 158.533. It broke well below the 20-period moving average (MA) on the 4-hour chart. However, on the higher-timeframe daily chart, it remains above the 10-period MA, and the daily RSI is hovering around 54. Therefore, we will be watching the euro’s price action ahead of tomorrow’s ECB meeting.

Today’s schedule includes: Turkey’s capacity utilization rate at 4:00 PM, Germany’s IFO Business Climate Index and Eurozone money supply at 5:00 PM, the U.S. MBA Mortgage Applications Index at 8:00 PM, Brazil’s Consumer Confidence Index at 9:00 PM, the Bank of Canada’s policy rate decision and statement, and U.S. new home sales at 11:00 PM, U.S. weekly crude oil inventories at 11:30 PM,at 12:00 AM, remarks by BOC Governor Maclean; at 1:00 AM, Russian industrial production; at 2:00 AM, the U.S. 5-year Treasury auction; and at 2:30 AM, remarks by ECB President Lagarde. With the ECB meeting tomorrow, we will carefully assess whether the euro continues to weaken and determine the market direction.