EURUSD:
EUR/USD in early European trading on 21 October moves in a narrow 1.16–1.17 range as participants await US releases and signals around the budget impasse. With parts of the federal government suspended, several agencies have already pared back functions, delaying some statistics and lifting overall uncertainty. The US dollar remains in demand as a defensive asset while markets assess the timeline for restoring government funding and the path of Federal Reserve rates. This setup maintains moderate pressure on the euro in the near term.
Across the euro area, fresh estimates confirm September inflation at 2.2% y/y, strengthening the case for the ECB to hold after the easing steps already implemented earlier this year. Minutes from the ECB’s September meeting also reflected a willingness to “keep a steady course” until price dynamics and the impact of fiscal policy in the region’s largest economies become clearer. Stable—but not overheated—inflation limits the scope for strong euro gains without a visible improvement in real yield differentials.
The US calendar remains decisive: anticipation around inflation data and Fed commentary, along with movements in US Treasury yields, shape demand for the dollar. While US real rates hold at comparatively elevated levels, capital flows into the dollar persist. Additional headwinds for the euro come from intermittent intra-European political headlines that can widen the uncertainty premium. In sum, the near-term balance of forces in the pair tilts to the downside.
Trading recommendation: SELL 1.1635, SL 1.1685, TP 1.1585
Origin: FreshForex
