The euro has put an end to a three-day recovery and remains moving back and forth between 1.1630 and 1.1650, after pulling back from session highs at 1.1665 reached during Thursday’s Asian session. The pair is looking for direction, with the US dollar firming up and most stock markets trading in the red as the risk rally witnessed earlier this week has cooled. With inflation concerns back to the table, investors are looking for safety in the US dollar and the Japanese yen to the detriment of riskier currencies like the euro. Corporate earnings, one of the main triggers of risk appetite over the last two days, have disappointed on Thursday, with the technological giant IBM posting weaker than expected quarterly results.
The macroeconomic calendar has been sending mixed signals on Thursday. US weekly jobless claims have dropped to their lowest levels in 19 months, with 296,000 new applicants last week, and existing home sales increased 7.0% to 6.29 Million in September, the best reading since January. On the other hand, The Philadelphia Fed Manufacturing survey dropped to 23.8 from 30.7 in the previous month in yet another evidence that supply chain disruptions are squeezing economic acivity. According to the FX Analysis team at Société Générale, the pair should rise above 1.1750 to confirm recovery: “EUR/USD has staged a bounce from 1.1525 and could head towards a multi-month descending channel at 1.1750 (…) Failure to cross this can result in further pullback towards March 2020 peak of 1.1495/1.1450.”
