The economic calendar for the week does not include any major events for the EUR/USD pair. The ZEW indices, which will be published on Tuesday (November 11), are of some interest. All other scheduled releases are of not even secondary, but tertiary importance. Therefore, the market's attention will be focused on other fundamental factors, such as the rhetoric of Federal Reserve representatives. Several members of the U.S. central bank will speak throughout the week. The ongoing shutdown, which has already become the longest in U.S. history, remains in the spotlight.
Towards the end of Friday's trading, sellers of EUR/USD recovered some lost positions amid a strengthening U.S. dollar. The dollar reacted positively to the news that Senate Minority Leader Chuck Schumer proposed to extend healthcare subsidies for a year to resume the federal government's operations. The EUR/USD pair retreated from its peak (1.1592) and finished the week at 1.1564.
However, after Friday's trading closed, it was announced that Senate Republicans had rejected the Democrats' proposal, though they had significantly softened their initial demands. Initially, the Democrats demanded that healthcare tax credits be made permanent and insisted on reversing cuts to Medicaid. However, Republicans did not agree even to the pared-back demands of the Democrats, insisting on passing a "clean" budget without any political add-ons or changes.
The shutdown continues, and there is no sign of resolution (for now).
Given Friday's reaction from dollar bulls, it can be assumed that at the start of the new trading week, the greenback will weaken. It is worth noting that each week of the prolonged shutdown lowers quarterly GDP by approximately 0.1-0.2 percentage points. The suspension of the U.S. government in 2018-2019 reduced U.S. GDP by 0.13%. According to several analysts, losses currently amount to about 0.15-0.2% of the annual figure. Over 6 weeks (42 days), the effect could reach 0.25% of GDP (approximately $60 billion). Today marks the 39th day.
In other words, each subsequent week of the shutdown will exert increasing pressure on the dollar.
The greenback faced pressure last week not only from conflicting (to put it mildly) macroeconomic reports (ADP, Challenger, ISM indices), but also from dovish signals from the Fed. Three members of the Board of Governors — Michael Barr, Stephen Miran, and Christopher Waller — supported a further rate cut of 25 basis points in December in one way or another. It should be clarified here that two of them (Waller and Miran) had previously expressed "dovish" rhetoric, urging their colleagues to ease monetary policy more aggressively. Therefore, the intrigue remains. If other Fed representatives also soften their rhetoric in response to the ISM indices and unofficial labor market reports, the dollar will come under additional pressure. Conversely, "hawkish" signals from Fed members will provide significant support to the greenback.
Throughout the upcoming week, several Fed representatives will speak. For example, on Wednesday, Board members Michael Barr and Christopher Waller will share their views, along with New York Fed President John Williams and Atlanta Fed President Raphael Bostic. On Thursday, speeches are expected from St. Louis Fed President Alberto Musalem and Cleveland Fed President Beth Hammack. On Friday, we will hear from Kansas City Fed President Jeffrey Schmidt and Dallas Fed President Lorie Logan.
Against the backdrop of an almost empty economic calendar, these fundamental factors (the Fed + the shutdown) will set the tone for trading. Macroeconomic reports will play a secondary, supportive role. For instance, the ZEW indices may provide background support for the euro — according to preliminary forecasts, the German business sentiment index is expected to increase this month to 41.2, which is its highest level since July of this year. The indicator has shown upward momentum for the second consecutive month, and November is expected to be the third month in this series. In turn, the eurozone business sentiment index should rise to 23.5 after falling to 22.7. It should be noted that the ZEW indices will be published on Tuesday, November 11.
On Friday, revised data on eurozone economic growth (second estimate) will also be published. According to preliminary forecasts, the second estimate will match the initial one: 0.2% q/q and 1.3% y/y.
These releases may provoke volatility in the EUR/USD pair only if they significantly diverge from the projected values.
From a technical perspective, the situation for the pair remains uncertain (for now). On Friday, buyers actively tested the resistance level at 1.1590 (the middle line of the Bollinger Bands indicator on the daily chart and simultaneously the upper boundary of the Kumo cloud on H4), but were unable to overcome it. This means the price is still situated between the middle and lower lines of the Bollinger Bands on D1, at the Tenkan-sen line, but below the Kijun-sen and the Kumo cloud. Long positions should only be considered after the pair breaks above the aforementioned price barrier at 1.1590. The next targets for the upward movement are 1.1650 (the lower boundary of the Kumo cloud on D1) and 1.1700 (the upper line of the Bollinger Bands on the same timeframe).
