EUR/USD climbs above 1.16 as Powell's neutral tone weigh on Dollar

• Fed's Powell signals "meeting-by-meeting" stance, says labor risks outweigh inflation pressures for now.
• France suspends pension reform amid political unrest, offering temporary relief to Euro sentiment.
• Dollar weakens as Sino-US trade tensions flare and business sentiment in the US deteriorates further.

EUR/USD recovers some ground on Tuesday as the Greenback weakens post neutral-dovish remarks by Fed Chair Jerome Powell and as the French government announced a suspension of a pension reform. The pair trades at 1.1606 up 0.32%.

Euro rebounds after Fed Chair signals caution and France suspends contentious pension overhaul

Euro's gain was mainly sponsored by a neutral-dovish tilt by Powell, who said that the economy is in a low-hiring, low-firing trend, yet acknowledged that risks to the labor market had increased, compared to inflation. He added that the economy is firmer than expected, and reassured the central bank is on a meeting-by-meeting approach.

Boston Fed Susan Collins was slightly hawkish as she said inflation continues to be top of mind, adding that even with some additional easing, policy would remain "mildly restrictive."

US-China tensions, ignited the Dollar's sell-off on Tuesday, as US President Donald Trump harsh rhetoric towards Beijing, is triggering a reaction by Chinese authorities, which added port fees on US vessels.

Data-wise, the docket in the US revealed that business sentiment deteriorated. Across the pond, steady German inflation figures and deterioration of the ZEW Survey of Expectations in the Eurozone, exerted downward pressure in the pair, which the shared currency shrugged off late in the day.

Meanwhile, the European Central Bank President Christine Lagarde reiterated that monetary policy is in good place, while Villeroy stressed that the next move in the bank is more likely a cut than a hike.

Daily market movers: Euro boosted by a weak US Dollar

• Fed Chair Jerome Powell said the outlook for employment and inflation has "not changed much" since the September policy meeting, noting that recent data suggest economic activity may be firmer than expected. He added that risks to the labor market have risen alongside inflationary pressures.
• Powell attributed elevated inflation mainly to higher goods prices, emphasizing that the increase reflects the impact of tariffs rather than broader inflationary trends.
• Boston Fed Susan Collins said that inflation should begin to ease as tariff impact fades. She acknowledged that downside risks to the labor market had risen, but noted favorable financial conditions would support households.
• The Fed will receive an update on consumer price inflation on October 24. The US. Bureau of Labor Statistics announced that it will release its latest Consumer Price Index (CPI) report amid the ongoing shutdown.
• The US Dollar Index (DXY), which tracks the performance of the buck's value against a basket of six currencies, sheds 0.25% of its value, down at 99.00.
• The NFIB Business Optimism Index tumbled 2.0 points to 98.8 last month, the first decline in three months. The NFIB Uncertainty Index jumped 7 points from August to 100, the fourth highest reading in over 51 years.
• Money markets are fully pricing in a 25-basis-point rate cut at the Fed's October 29 meeting, with odds at 97%, according to the Prime Market Terminal probability tool.
• Germany's ZEW saw Economic Sentiment fall shy of expectations, 39.3, below estimates of 41 but above the previous reading of 37.3 . Current Conditions unexpectedly worsened to -80.0, worse than the previous month -76.4, and missing forecasts for an improvement to -74.8. The ZEW President commented that "Hopes for a medium-term recovery remain".

Technical outlook: EUR/USD reclaims 1.1600, yet it remains bearish

The EUR/USD technical picture improved on Tuesday, yet the pair remains neutral to downward biased as it remains below the 100-day Simple Moving Average (SMA) at 1.1641. Last Friday, the Relative Strength Index (RSI) drifted below the neutral 50 level, suggesting that downside momentum is gaining steam.

Key support lies at 1.1600, followed by 1.1550, and by 1.1500. A breach of the latter exposes the August 1 cycle low around 1.1391. Conversely, major resistance is seen at 1.1650 and 1.1700. A decisive move above 1.1700 could pave the way for a test of 1.1800 and the July 1 high at 1.1830.