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EUR/USD, FTSE Forecast: Two trades to watch

Article By: ,  Senior Market Analyst
October 24, 2024 9:05 AM

EUR/USD remains below 1.08 ahead of PMI data

  • Eurozone Composite PMIs are expected to contract at a slower pace
  • ECB is expected to continue cutting rates
  • EUR/USD trades below 1.08

EUR/USD is rising, snapping a three-day winning run amid profit-taking in the USD, although the USD remains supported near a 3-month high against its major peers.

The EUR has steadied ahead of PMI data, which is expected to show that business activity contracted at a slower pace in October. The composite PMI rose to 49.8 after falling to 49.6 in September. By staying in contraction, pressure remains on the ECB to continue cutting interest rates as growth prospects remain a concern for the central bank.

Yesterday, ECB President Christine Lagarde said the central bank would need to be cautious when considering further rate cuts. Earlier in the week, she said that inflation would likely fall below target more quickly than expected, paving the way for further cuts. Some policymakers are even considering cutting rates below neutral to stimulate the economy.

Meanwhile, the USD is easing on profit-taking but remains close to recent highs, supported by expectations that the Federal Reserve will cut rates more gradually after hawkish Fed comments and upbeat data. US PMI figures are also due today and are expected to show services PMI remains solid at 55, and manufacturing contracted at a slower pace in October.

The USD has also been boosted by safe-haven flows amid uncertainty surrounding the US elections in two weeks.

EUR/USD forecast – technical analysis

EUR/USD rebounded lower from 1.12, falling below several key support levels. It is testing the rising trendline support at 1.0770. The RSI is in oversold territory, so sellers should be cautious.

Bears will look to take out the trendline support to bring the 1.07 round number into play.

Meanwhile, buyers will look to rise above 1.08 round number to then expose the 200 SMA at 1.0870, a rise above here could see buyers gain some traction towards 1.09.

FTSE rises ahead of PMI data & after upbeat Barclays results

  • PMIs are expected to show expansion
  • Barclays rises to a 9-year high
  • FTSE rises but remains in a familiar range

FTSE has opened high ahead of UK PMI data and after better than forecasts earnings from Barclays.

UK PI data is expected to show that the dominant service sector expanded in October at 52.6, in line with September. Manufacturing PMI is expected to remain in expansion as well at 51.4, down modestly from 51.5. The data comes amid signs that the UK economy is holding up as inflation cools and the BoE continues to assess whether to cut rates again in November. The market is pricing in around a 90% chance of a November rate cut.

The UK index is also buoyed by Barclays hitting a 9-month high after profits jumped 23% to £1.6 billion, comped with £1.17 billion forecast. Revenue for the period came in at £6.5 billion, slightly ahead of the £6.39 billion forecast. The upbeat numbers come after Barclays announced a strategic overhaul earlier this year to boost returns.

Meanwhile, heavyweight miner Anglo American has risen 3.5%, topping the FTSE leaderboard despite posting double digit falls in Q3 copper and diamond production. Instead, the market cheered that the miner maintained 2024 guidance.

FTSE forecast – technical analysis

The FTSE continues to trade within a familiar range, once again below 8325 but holding above the 50 SMA at 8250. The RSI is neutral. The setup favors a breakout trade. Buyers will look to rise above 8325 to extend gains towards 8400, last week’s high, and on to 8480, the record high.

Meanwhile, sellers will look to break below the 50 SMA at 8250 before focusing on 8150, the September low. A break below here exposes the 200.

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