USD’s Tepid Rise, EU’s Manufacturing Woes, and GBP’s Technical Tussle.

USD Update: The DXY index cautiously climbed 0.25% to 104.35 after a Tuesday dip prompted by softer U.S. CPI numbers. The greenback’s rebound, attributed to a modest U.S. yield recovery, remains guarded amid market speculation of an impending Fed pivot. The release of producer price data, depicting a significant 0.5% MoM decline in October, intensifies concerns about a cooling economy. Traders are eagerly awaiting upcoming economic releases to validate expectations of a sustained downturn and assess the likelihood of a U.S. dollar decline.

EUR Manufacturing Struggles: Preliminary data from Eurostat paints a somber picture for EU manufacturing, experiencing a substantial 6.1% YoY decline in September—the sharpest drop since June 2020. Notably, Germany, the Netherlands, Spain, Italy, and France, top gas consumers, exhibit a concerning trend with Spain being the lone exception. The downturn in manufacturing across most EU nations raises significant questions about the economic health and resilience of the region.

GBP/USD Technical Outlook: GBP/USD extends its downtrend, trading around 1.2390 during the Asian session. Key support levels are identified at 1.2350 and the psychological barrier of 1.2300. Despite the bearish momentum, technical indicators provide a nuanced perspective. The 14-day Relative Strength Index (RSI) above the 50 level indicates potential upward support, reflecting a robust momentum in favor of the pair. The Moving Average Convergence Divergence (MACD) line, positioned above the centerline with divergence above the signal line, suggests a bullish momentum.