EUR/USD has retraced previous gains on Wednesday, and remains practically flat on the day, trading right below 1.1600 at the time of writing. The US Dollar (USD) resumed its uptrend in the early European trading session, although the US government closure and market expectations of back-to-back rate cuts by the Federal Reserve (Fed) are keeping US Dollar bulls in check for now.
On Tuesday, US President Donald Trump rebuffed meeting requests by Democratic lawmakers from the previous day, saying that he will not meet them until the government reopens. Meanwhile, the shutdown enters its fourth week as the Senate failed to pass a funding resolution for the 11th time on Monday.
In the absence of key macroeconomic releases in the Eurozone and the US, the speeches of European Central Bank (ECB) policymakers, including President Christine Lagarde and Vice President Luis de Guindos, and Fed officials will be the unique distraction for traders. These speeches, however, are unlikely to provide any new clues on the central banks’ near-term monetary policies.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.35% | -0.17% | -0.10% | -0.10% | -0.15% | -0.04% | |
| EUR | 0.00% | 0.36% | -0.16% | -0.10% | -0.11% | -0.13% | -0.04% | |
| GBP | -0.35% | -0.36% | -0.49% | -0.46% | -0.46% | -0.48% | -0.39% | |
| JPY | 0.17% | 0.16% | 0.49% | 0.04% | 0.06% | 0.02% | 0.13% | |
| CAD | 0.10% | 0.10% | 0.46% | -0.04% | -0.01% | -0.02% | 0.06% | |
| AUD | 0.10% | 0.11% | 0.46% | -0.06% | 0.00% | -0.02% | 0.06% | |
| NZD | 0.15% | 0.13% | 0.48% | -0.02% | 0.02% | 0.02% | 0.09% | |
| CHF | 0.04% | 0.04% | 0.39% | -0.13% | -0.06% | -0.06% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Daily digest market movers: Fed monetary easing hopes weigh on the USD
- The US Dollar lost momentum as the latest episode of the Sino-US trade war went into the back burner, and investors shifted their focus once again to the protracted US government shutdown and the prospects of a series of interest rate cuts by the Federal Reserve.
- A survey by Reuters showed on Tuesday that most analysts expect the Fed to cut rates by 25 basis points at the October 28-29 meeting and a further quarter-point in December. 25 of 33 economists show concerns that the central bank might go too far with monetary easing and set a very low terminal rate by the end of next year.
- US President Trump affirmed on Tuesday, that Republicans “will not be extorted” by Democrats to bend to their demands, which suggests that this government closure is likely to be one of the largest in history. Such an extended closure will likely take a toll on US GDP growth and undermine investors’ confidence in the US Dollar.
- Earlier this week, Trump announced that he will meet Chinese President Xi Jinping in South Korea next week and that he expects to reach a fair deal. These comments have ditched fears of a US-China trade war, at least for now, and triggered a sharp sell-off in precious metals.
Technical Analysis: EUR/USD bears are testing the 1.1600 support area
EUR/USD has found support at the 1.1600 level, but the broader trend remains bearish, following the rejection at 1.1730 last week. Technical indicators are in negative territory. The 4-hour Relative Strength Index is below 40.00, which highlights the fragility of the pair’s recovery attempt.
Upside attempts remain subdued, well below Tuesday’s highs, in the area of 1.1650. The pair should break above that level to shift the focus to the October 17 high, at 1.1728. Further up, the October 1 high, around 1.1775, comes into focus.
On the other hand, a confirmation below the intra-day low of 1.1598 would expose the October 9 and 14 lows in the area of 1.1545 ahead of the channel bottom, now around 1.1460.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.