Yesterday, the euro fell for most of the day, although the week started well for the currency. On Monday morning, the pair opened with a gap up because the weekend in France proved calmer than the market had feared and no new escalation occurred in the Middle East. In such moments the dollar loses some safe-haven demand, and the euro benefited — but that boost was short-lived. Buyers ran out quickly, the pair slid all day, and by Tuesday morning it rested near 1.1167. The dollar did nothing special; the euro found no reason to hold higher.
The main disappointment was Germany's Ifo survey—which polls company executives about current conditions and expectations. The headline index reached 90.2, slightly above the 89.8 forecast, which at first glance looks OK. But the internal picture was worse: the current-conditions reading fell to 88.8 versus an expected 89.4, with businesses complaining about expensive energy. Expectations pulled the headline up — 91.6 versus an 89.9 forecast — but the market focuses primarily on how things stand now, and hopes for the future did not impress, so nobody stepped in to buy the euro after that report.
Germany's Friday PMI reinforced the worrying picture. The composite fell to 52.8 from 53.8 a month earlier. Growth remains, but momentum is clearly slowing. With the ECB meeting on October 29 approaching, the euro lacks its own support. The market expects a pause, and the next rate increase is priced for December, so buyers should not expect help from the central bank in the coming days, while high oil continues to weigh on the region's economy.
All eyes are now on the Federal Reserve meeting on October 28. The probability of a rate hike is below 10% — the market expects a pause — but the Fed's wording could sound hawkish because U.S. inflation remains elevated. With no new drivers, I think the dollar will keep the advantage and the euro will struggle to regain what it lost.
Today the euro-area calendar is light, and the three releases are usually treated as background. First, private-sector credit for September (consensus 3.1%), which shows how fast borrowing by households and firms is growing and how rate rises pass into the economy. Second, M3 money supply — the broadest measure of money circulating in the economy — is expected at 3.6% after 3.5%; the European Central Bank watches it as a hint about future inflation. Third, Spain's Q3 unemployment is forecast at 9.90% after 9.87%. Forecasts basically repeat prior values, so I expect no surprises. For the euro to move decisively, figures would need to deviate materially from expectations; neutral data against yesterday's Ifo will not provide support. Most likely, until the Fed decision, the pair will respond more to dollar-sentiment than to European data.
Momentum
The price is now at 1.1167 — roughly ten pips from each breakout level. The upside reference is 1.1176. If the pair holds above it, the path opens to 1.1195 and then 1.1211. I don't give that scenario high probability because the calendar is light and there is little to push the euro higher; overnight, the pair repeatedly hit the 1.1175 area and turned down. The downside reference is 1.1155. A break there leads to 1.1136 and then 1.1117. I view the downward direction as primary given three sources of pressure on the euro: the weak current-conditions reading in Ifo, high oil prices, and caution ahead of the Fed. Reminder for beginners: a first touch is not a confirmed breakout — wait to see the price sustain the other side before calling it a breakout.
Mean Reversion
Upside reversion level: 1.1181. The idea: price moves above but fails to hold and returns, which would be a sell signal. This level sits only five pips above the breakout point 1.1176, so trade with care. If price clears 1.1176, reaches 1.1181, and decisively closes above it, that is a confirmed breakout and selling is off the table. If it merely touches the zone and quickly falls back below 1.1176, the reversion plays. The difference between these scenarios can unfold in minutes, so skip the first reaction and wait for clarity. Place the stop above the highest point of the failed attempt.
Downside reversion level: 1.1160, also five pips above the breakout at 1.1155. Here I look for long positions if price dips briefly below 1.1160, fails to extend lower, and returns above. But if it cleanly breaks 1.1155 and holds below, the reversion fails, and the sell scenario takes over. Thus, a stop under 1.1155 is sensible because the picture changes once that level is convincingly lost. Given the overall backdrop, I expect weaker rebounds and a higher chance of continuation downward than of strong upside reversals.
