FX.co ★ Blackpink | EUR/USD

The EUR gives up almost all its initial gains against the USD in the European session on Thursday. The EUR/USD pair remains flat at around 1.1228 after pulling back from its intraday high of 1.1268. The major currency pair pulls back as the US Dollar rebounds from losses, with the US Dollar Index (DXY) reversing course and rising marginally to around 101.54. Nevertheless, market analysts question whether the US Dollar's rally can continue amid headwinds from United States (US) political turmoil and a plunge in oil prices. Analysts at MUFG note that "the weaker US dollar and lower US yields have been supported by the sharp drop in the price of oil, which is helping to alleviate market worries over upside inflation risks." The analysts further explain that "the price of Brent has declined by around USD10/barrel following the US mid-term election results." The analysts also explain that the commodity price is falling toward support at the "200-day moving average at around USD93.60/barrel." MUFG explains that oil "has already fallen sharply this week and the mid-term election results have compounded the decline." The bank also warns of "another downside risk for the US dollar from the US mid-term election", citing the likelihood that the result could "further undermine investor confidence in US AI-related investments in reaction to heightened Democratic opposition to the AI build-out." On the economic front, market players are looking forward to the release of the US Nonfarm Payrolls (NFP) report on Friday, October. The US NFP report may affect the Federal Reserve's (Fed) interest rate expectations. Currently, market participants expect the Fed to raise interest rates by 25 basis points (bps) to the 4.00%-4.25% range at its December monetary policy decision. For the Euro, the continued surge in Eurozone inflation has made an ECB rate hike even more likely in the coming months. Commerzbank's Antje Praefcke notes that current Eurozone data continue to favour further tightening of monetary policy, as "at the same time, euro area inflation picked up to 4% on a year-on-year basis in October, with the core figure still holding steady at 2.5%." She argues that "while those numbers came in in line with analysts' estimates, with the target inflation rate of 2% and the deposit rate of 2.50%, they make it evident that more ECB rate rises are needed." In her opinion, "due to the ongoing high energy prices, more and more firms will be able to raise costs over time." EUR/USD is trading at 1.1224 on the daily chart. The pair is trading just above the 20-day exponential moving average (EMA) at 1.1217, suggesting potential stabilisation after the drop, despite the lack of upside reference levels to shift sentiment from neutral to positive. The Relative Strength Index (RSI) at 48 is approaching the midline, which indicates the slowing downtrend but does not show the beginning of an uptrend. As for support levels, the first is the 20-day EMA at 1.1217. A break below this level would increase the risk of a drop to the chart's previous lows. As long as price continues to hover around this moving average and the RSI approaches 50, the market's consolidation may continue.